We face strong competition.
We face strong competition in all aspects of our business. Competition is particularly intense for
prospective undeveloped leases and purchases of proved oil and gas reserves. There is also
competition for the rigs and related equipment and services that are necessary for us to develop and
operate our oil and natural gas properties. Our competitive position is also highly dependent on our
ability to recruit and retain geological, geophysical and engineering expertise. We compete for
prospects, proved reserves, field services and qualified oil and gas professionals with major and
diversified energy companies. Some companies may be able to more successfully define, evaluate, bid
for and purchase properties and prospects than us.
Certain federal income tax deductions currently available with respect to oil and gas
exploration and development may be eliminated as a result of future legislation.
Among the changes contained in the Obama Administration’s Fiscal Year 2013 budget proposal,
released by the Office of Management and Budget on February 13, 2012, is the elimination or deferral
of certain U.S. federal income tax deductions and credits currently available to oil and gas exploration
companies. Such changes include, but are not limited to, (i) the elimination of current deductions for
intangible drilling and development costs; (ii) the elimination of the deduction for certain U.S.
production activities for oil and gas properties; (iii) an extension of the amortization period for certain
geological and geophysical expenditures and (iv) the repeal of the enhanced oil recovery credit. Some
of these same proposals to repeal or limit oil and gas tax deductions and credits have been included in
legislation that has recently been considered by Congress. It is unclear whether any such changes will
be enacted or how soon such changes could be effective. The passage of any legislation as a result of
the budget proposal, or the passage of bills containing similar changes in U.S. federal income tax law
could eliminate or defer certain tax deductions and credits that are currently available with respect to oil
and gas exploration and development and could negatively affect our financial results.
We have limited control over the activities on properties we do not operate.
Some of our properties, including our Haynesville Shale acreage and portions of our Eagle Ford
Shale acreage, in which we have an interest are operated by other companies and involve third-party
working interest owners. As a result, we have limited ability to influence or control the operation or
future development of such properties, including compliance with environmental, safety and other
regulations, or the amount of capital expenditures that we will be required to fund with respect to such
properties. Moreover, we are dependent on the other working interest owners of such projects to fund
their contractual share of the capital expenditures of such projects. These limitations and our
dependence on the operator and other working interest owners for these projects could cause us to
incur unexpected future costs, result in lower production and materially and adversely affect our
financial condition and results of operations.
The high cost or unavailability of drilling rigs, equipment, supplies and other oil field services
could adversely affect our ability to execute our exploration and development plans on a timely
basis and within our budget, which could have an adverse effect on our business, financial
condition or results of operations.
Our industry is cyclical and, from time to time, there is a shortage of drilling rigs, equipment or
supplies. During these periods, the costs of rigs, equipment and supplies are substantially greater and
their availability may be limited. Additionally, these services may not be available on commercially
reasonable terms. The high cost or unavailability of drilling rigs, equipment, supplies, personnel and
other oil field services could adversely affect our ability to execute our exploration and development
plans on a timely basis and within our budget, which could have an adverse effect on our business,
financial condition or results of operations.
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