Item 1A. Risk Factors
As described in “Forward–Looking Statements,” this Form 10–K contains forward–looking statements regarding us, our business and our industry. The risk factors described below, among others, could cause our actual results to differ materially from the expectations reflected in the forward–looking statements. If any of the following risks actually occur, our business, financial condition, results of operations and cash flows could be negatively impacted.
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Industry and General Economic Risks
Macroeconomic conditions, including an increase in inflation and trade tensions, could have adverse effects on our results of operations.
Uncertainty on future inflation trends and fluctuations in interest rates have created further uncertainty for the economy and for our customers. Elevated inflation will increase our labor costs and the costs of parts, lube oil and other materials used in our operations. An increase in inflation rates could negatively affect our profitability and cash flows, due to higher wages, higher operating costs, higher financing costs, and/or higher supplier prices. We may be unable to pass along such higher costs to our customers. In addition, inflation may adversely affect customers’ financing costs, cash flows, and profitability, which could adversely impact their operations and our ability to collect receivables.
Additionally, trade tensions or restrictions on free trade, including the tariffs that have been imposed and proposed by the current administration, could exacerbate these effects. Any widespread imposition of new or increased tariffs and trade restrictions could increase the cost of imported materials and products, such as steel, which accordingly could increase costs of our products, disrupt our supply chain, cause adverse financial impacts due to volatility in foreign exchange rates and interest rates, increase inflationary pressures on raw materials and energy, and negatively impact our profit margins. New or increased tariffs could also negatively affect U.S. national or regional economies, which could affect the demand for our products.
Pandemics and other public health crises may negatively affect demand for our services, and may have a material adverse impact on our financial condition, results of operations and cash flows.
Pandemics or other public health crises could significantly impact public health, economic growth, supply chains and markets. The extent to which our operating and financial results may be affected by future pandemics or other public health crises will depend on various factors and consequences beyond our control, such as the duration and scope of such pandemic or public health crisis, additional actions by businesses and governments in response to the pandemic and the speed and effectiveness of responses to combat any such pandemic or public health crisis. Any future pandemic or public health crisis may materially adversely affect our operating and financial results in a manner that is not currently known to us or that we do not currently consider to present significant risks to our operations.
Ongoing International Conflicts and Tensions
The conflict in Ukraine, the Israel-Hamas war, other geopolitical conflicts, and related price volatility and geopolitical instability could negatively impact our business.
In late February 2022, Russia launched significant military action against Ukraine, and in October 2023, Israel launched a military response against Hamas in Gaza. These ongoing conflicts and other geopolitical conflicts, such as the developments in Venezuela, have caused, and could intensify, volatility in oil and natural gas prices, and the extent and duration of these military actions, sanctions and resulting market disruptions could be significant and could potentially have a substantial negative impact on the global economy and/or our business for an unknown period of time. Any such volatility and disruptions may also magnify the impact of other risks described in this “Risk Factors” section.
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Business and Operational Risks
Our operations entail inherent risks that may result in substantial liability. We do not insure against all potential losses and could be seriously harmed by unexpected liabilities.
Our operations entail inherent risks, including equipment defects, malfunctions and failures and natural disasters, which could result in uncontrollable flows of natural gas or well fluids, fires and explosions. These risks may expose us, as an equipment operator, to liability for personal injury, wrongful death, property damage, pollution and other environmental damage. The insurance we carry against many of these risks may not be adequate to cover our claims or losses. Our insurance coverage includes property damage, general liability and commercial automobile liability and other coverage we believe is appropriate. Additionally, we are substantially self-insured for workers’ compensation and employee group health claims in view of the relatively high per- deductibles we absorb under our insurance arrangements for these risks. We are also self -insured for property to our offshore assets. Further, insurance covering the risks we expect to face or in the amounts we desire may not be available in the future or, if available, the premiums may not be commercially . If we were to incur substantial liability and such were not covered by insurance or were in excess of policy limits, or if we were to incur liability at a time when we are not to obtain liability insurance, our business, results of operations and financial condition could be impacted.
We face significant competitive pressures that may cause us to lose market share and negatively affect our business, results of operations, financial condition and cash flows.
Our business is highly competitive, and there are low barriers to entry. Our competitors may be able to more quickly adapt to technological changes within our industry and changes in economic and market conditions as a whole, more readily take advantage of acquisitions and other opportunities and adopt more aggressive pricing policies. Our ability to renew or replace existing contract operations service agreements with our customers at rates sufficient to maintain current revenue and cash flows could be adversely affected by the activities of our competitors. If our competitors substantially increase the resources they devote to the development and marketing of competitive products, equipment or services or substantially decrease the price at which they offer their products, equipment or services, we may not be able to compete effectively.
In addition, we could face significant competition from new entrants into the compression services business and heightened competition from consolidation of our competitors. Some of our existing competitors or new entrants may expand or fabricate new compressors that would create additional competition for the services we provide to our customers. Certain of these competitors may have greater financial, technical and marketing resources than us, and may be in a better competitive position. In addition, our customers may purchase and operate their own compression fleets in lieu of using our natural gas compression services. In recent years, consolidation in the oil and gas industry has led to combinations of our customers, who have leveraged their size and purchasing power to pursue economies of scale and pricing concessions, which could lead to decreased demand for our products and services. We also may not be able to take advantage of certain opportunities or make certain investments because of our debt levels and our other obligations. Any of these competitive pressures could have a material adverse effect on our business, results of operations, financial condition and cash flows.
Any acquisitions we complete, including the NGCS Acquisition, are subject to substantial risks that could reduce our ability to make distributions to our common stockholders.
Even if we do make acquisitions that we believe will increase the amount of cash available for distribution to our common stockholders, these acquisitions, including the NGCS Acquisition, may nevertheless result in a decrease in the amount of cash available for distribution to our common stockholders. Any acquisition, including the NGCS Acquisition, involves potential risks, including, among other things:
the assumption of unknown liabilities, losses or costs for which we are not indemnified or for which any indemnity we receive is inadequate;
our inability to obtain satisfactory title to the assets we acquire; and
the occurrence of other significant changes, such as impairment of long-lived assets, asset devaluation or restructuring charges.
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If we do not make acquisitions on economically acceptable terms, our future growth could be limited.
Our ability to grow depends, in part, on our ability to make accretive acquisitions. If we are unable to make accretive acquisitions either because we are (i) unable to identify attractive acquisition candidates or negotiate acceptable purchase contracts with them, (ii) unable to obtain financing for these acquisitions on economically acceptable terms or (iii) outbid by competitors, then our future growth and ability to maintain dividends could be limited. Furthermore, even if we make acquisitions that we believe will be accretive, these acquisitions may nevertheless result in a decrease in the cash generated from operations.
Any acquisition involves potential risks, including, among other things:
an inability to successfully integrate the businesses we acquire;
the assumption of unknown liabilities;
limitations on rights to indemnity from the seller;
mistaken assumptions about the cash generated or anticipated to be generated by the business acquired or the overall costs of equity or debt;
the diversion of management’s attention from other business concerns;
unforeseen operating difficulties; and
customer or key employee losses at the acquired businesses.
If we consummate any future acquisitions, our capitalization and results of operations may change significantly and we will not have the opportunity to evaluate the economic, financial and other relevant information that we will consider in determining the application of our future funds and other resources. In addition, competition from other buyers could reduce our acquisition opportunities or cause us to pay a higher price than we might otherwise pay.
We may not be able to achieve the expected benefits of the NGCS Acquisition. We may also encounter significant difficulties in integrating NGCS.
We may not be able to achieve the expected benefits of the NGCS Acquisition. There can be no assurance that the NGCS Acquisition will be beneficial to us. We may not be able to integrate the assets acquired in the NGCS Acquisition without increases in costs or other difficulties. The integration of a business is a complex, costly and time-consuming process. As a result, we will be required to devote significant management attention and resources to integrating our business practices and operations with the business practices and operations of NGCS. The integration process may disrupt our business and, if implemented ineffectively, would restrict the full realization of the anticipated benefits from the NGCS Acquisition. The failure to meet the challenges involved in integrating NGCS and to realize the anticipated benefits of the NGCS Acquisition could have an adverse effect on our business, results of operations, financial condition and prospects, as well as the market price of our common stock. The of integrating the operations of acquired businesses include, among others:
difficulties with the integration of the business of NGCS and workforce following the completion of the NGCS Acquisition;
conditions in the oil and natural gas industry, including the level of production of, demand for or price of oil or natural gas;
our reduced profit margins or the loss of market share resulting from competition or the introduction of competing technologies by other companies;
changes in economic or political conditions, including terrorism and legislative changes;
the inherent risks associated with our operations, such as equipment defects, impairments, malfunctions and natural disasters;
the risk that counterparties will not perform their obligations under our financial instruments;
the financial condition of our customers;
our ability to timely and cost-effectively obtain components necessary to conduct our business;
employment and workforce factors, including our ability to hire, train and retain key employees;
our ability to implement certain business and financial objectives, such as:
winning profitable new business;
growing our asset base and enhancing asset utilization;
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integrating acquired businesses;
generating sufficient cash;
accessing the capital markets at an acceptable cost;
liability related to the use of our services;
changes in governmental safety, health, environmental or other regulations, which could require us to make significant expenditures;
the effectiveness of our control environment, including the identification of control deficiencies; and
our level of indebtedness and ability to fund our business.
Many of these factors are outside of our control, and any one of them could result in increased costs and liabilities, decreases in the amount of expected revenue and earnings, and diversion of management’s time and energy, which could have a material adverse effect on our business, financial condition and results of operations. Further, additional unanticipated costs may be incurred in the integration of the acquired business.
The market price of our common stock may decline as a result of the NGCS Acquisition if, among other things, the integration of the properties acquired in the NGCS Acquisition is unsuccessful or transaction costs related to the NGCS Acquisition are greater than expected. The market price of our common stock may decline if we do not achieve the perceived benefits of the NGCS Acquisition as rapidly or to the extent anticipated by us or by securities market participants or if the effect of the NGCS Acquisition on our business, results of operations or financial condition or prospects is not consistent with our expectations or those of securities market participants.
Our sustainability initiatives, including emissions reduction and our public statements and disclosures regarding the same, expose us to numerous risks.
We have developed, and we will continue to develop objectives related to sustainability matters. Statements related to these objectives are made using various underlying assumptions and reflect our current intentions, and do not constitute a guarantee that they will be achieved or achieved within the projected timeframe. Our efforts to research, establish, accomplish, and accurately report on these objectives expose us to numerous operational, reputational, financial, legal and other risks. Our ability to achieve any objective is subject to numerous factors and conditions, many of which are outside of our control, including the availability of alternative energy sources in the jurisdictions in which we operate, the capacity of electrical grids to support traditional and alternative energy sources, and the broader economic and legal circumstances affecting energy and electricity locally. We cannot predict the ultimate impact of achieving our objectives, or the various implementation aspects, on our financial condition and results of operations.
There can be no assurance that we will pay dividends in the future.
We cannot provide assurance that we will, at any time in the future, again generate sufficient surplus cash that would be available for distribution to the holders of our common stock as a dividend or that our Board of Directors would determine to use any of our net profits to pay a dividend.
Future dividends may be affected by, among other factors:
the availability of surplus or net profits, which in turn depend on the performance of our business and operating subsidiaries;
our debt service requirements and other liabilities;
our ability to refinance our debt in the future or borrow funds and access capital markets;
restrictions contained in our Debt Agreements;
our future capital requirements, including to fund our operating expenses and other working capital needs;
the rates we charge for our services;
the level of demand for our services;
the creditworthiness of our customers;
our level of operating expenses; and
changes in U.S. federal, state and local income tax laws or corporate laws.
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We cannot provide assurance that we will declare or pay dividends in any particular amount or at all in the future. A decision not to pay dividends or a reduction in our dividend payments in the future could have a negative effect on our stock price.
Financial Risks
We have a substantial amount of debt that could limit our ability to fund future growth and operations and increase our exposure to risk during adverse economic conditions.
As of December 31, 2025, we had $2.4 billion in outstanding debt obligations, net of unamortized debt premiums and unamortized deferred financing costs, outstanding under our Credit Facility and senior notes. Many factors, including factors beyond our control, may affect our ability to make payments on our outstanding indebtedness. These factors include those discussed elsewhere in these Risk Factors.
Our substantial debt level and associated commitments could have important consequences to our liquidity, particularly to the extent our borrowing capacity becomes covenant restricted. For example, these commitments could:
make it more difficult for us to satisfy contractual obligations;
increase our vulnerability to general adverse economic and industry conditions;
limit our ability to fund future working capital, capital expenditures, acquisitions or other corporate requirements;
increase our vulnerability to interest rate fluctuations because the interest payments on a portion of our debt are based upon variable interest rates, and a portion can adjust based on our credit statistics;
limit our flexibility in planning for, or reacting to, changes in our business and our industry;
place us at a disadvantage compared to our competitors that have less debt or less restrictive covenants in such debt; and
limit our ability to incur indebtedness in the future.
Covenants in our Debt Agreements may impair our ability to operate our business.
Our Debt Agreements contain various covenants with which we or certain of our subsidiaries must comply, including, but not limited to, restrictions on the use of proceeds from borrowings, limitations on the incurrence of indebtedness, investments, acquisitions, making loans, liens on assets, repurchasing equity, making dividends, transactions with affiliates, mergers, consolidations, dispositions of assets and other provisions customary in similar types of agreements. The Debt Agreements also contain various covenants requiring mandatory prepayments from the net cash proceeds of certain asset transfers.
Our Credit Facility is also subject to financial covenants, including the following ratios, as defined in the corresponding agreement:
EBITDA to Interest Expense
Senior Secured Debt to EBITDA
Total Debt to EBITDA (1)
Subject to a temporary increase to 5.50 to 1.0 for any quarter during which an acquisition satisfying certain thresholds is completed and for the two quarters immediately following such quarter.
If we were to anticipate non-compliance with these financial ratios, we may take actions to maintain compliance with them. These actions include reductions in our general and administrative expenses, capital expenditures or the payment of cash dividends. Any of these measures may reduce the amount of cash available for payment of dividends and the funding of our business requirements, which could have an adverse effect on our business, operations, cash flows or the price of our common stock.
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The breach of any of the covenants under the Debt Agreements could result in a default under the Debt Agreements, which could cause indebtedness under the Debt Agreements to become due and payable. If the repayment obligations under the Debt Agreements were to be accelerated, we may not be able to repay the debt or refinance the debt on acceptable terms and our financial position would be materially adversely affected. A material adverse effect on our assets, liabilities, financial condition, business or operations that, taken as a whole, impacts our ability to perform the obligations under the Debt Agreements could lead to a default under those agreements. Further, a default under one or more of the Debt Agreements would trigger cross-default provisions under the other Debt Agreements, which would accelerate our obligation to repay the indebtedness under those agreements.
As of December 31, 2025, we were in compliance with all covenants under the Debt Agreements, excluding the 2034 Notes, which were issued in January 2026 and not subject to covenant compliance as of December 31, 2025. See Note 15 (“Long-Term Debt”) for further details.
We may be unable to access the capital and credit markets or borrow on affordable terms to obtain additional capital that we may require.
Historically, we have financed acquisitions, operating expenditures and capital expenditures with a combination of cash provided by operating and financing activities. However, to the extent we are unable to finance our operating expenditures, capital expenditures, scheduled interest and debt repayments and any future dividends with net cash provided by operating activities and borrowings under the Credit Facility, we may require additional capital. Periods of instability in the capital and credit markets (both generally and in the oil and gas industry in particular) could limit our ability to access these markets to raise debt or equity capital on affordable terms or to obtain additional financing. Among other things, our lenders may seek to increase interest rates, enact tighter lending standards, refuse to refinance existing debt at maturity at favorable terms or at all and may reduce or cease to provide funding to us. Additionally, extended lead times for newly fabricated equipment can increase near-term capital needs and create timing inconsistency between funding availability and capital expenditures. If we are unable to access the capital and credit markets on favorable terms, or if we are not in raising capital within the time period required or at all, we may not be to grow or maintain our business, which could have a material effect on our business, results of operations and financial condition.
Our inability to fund purchases of additional compression equipment could adversely impact our financial results.
We may not be able to maintain or increase our asset and customer base unless we have access to sufficient capital to purchase additional compression equipment. Cash flow from our operations and availability under our Credit Facility may not provide us with sufficient cash to fund our capital expenditure requirements, including any funding requirements related to acquisitions. Our ability to grow our asset and customer base could be impacted by limits on our ability to access additional capital.
We may be vulnerable to fluctuations in interest rates due to our variable rate debt obligations.
Borrowings under our Credit Facility are subject to variable interest rates. Changes in economic conditions outside of our control could result in fluctuations in interest rates, and higher interest rates will thereby increase our interest expense and reduce the funds available for capital investment, operations or other purposes. In addition, a substantial portion of our cash flow must be used to service our debt obligations. Any increase in our interest expense could negatively impact our results of operations and cash flows, including our ability to pay dividends in the future.
Our Amended and Restated Credit Agreement changed the referenced rate from LIBOR to SOFR so that borrowings under the Credit Facility bear interest at, based on our election, either a base rate or SOFR, plus an applicable margin. The Amended and Restated Credit Agreement contains SOFR benchmark replacement provisions. At this time, there can be no assurance as to whether any alternative benchmark or resulting interest rates may be more or less favorable than SOFR.
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Customer and Contract Risks
The erosion of the financial condition of our customers could adversely affect our business, results of operations, financial condition and cash flows.
Many of our customers finance their exploration and production activities through cash flow from operations, the incurrence of debt or the issuance of equity. During times when the oil or natural gas markets weaken, our customers are more likely to experience a downturn in their financial condition. Additionally, some of our midstream customers may provide their gathering, transportation and related services to a limited number of companies in the oil and gas production business. A reduction in borrowing bases under reserve-based credit facilities, the lack of availability of debt or equity financing or other factors that negatively impact our customers’ financial condition could result in a reduction in our customers’ spending for our products and services, which may result in their cancellation of contracts, the cancellation or delay of scheduled maintenance of their existing natural gas compression equipment, their determination not to enter into new natural gas compression service contracts or their determination to cancel or delay orders for our services. Furthermore, the by our midstream customers of their key customers could reduce demand for their services and result in a of their financial condition, which would in turn decrease their demand for our services. Any such action by our customers would reduce demand for our services. Reduced demand for our services could affect our business, results of operations, financial condition and cash flows. In addition, in the event of the financial of a customer, we could experience a on all or a portion of our outstanding accounts receivable associated with that customer.
The loss of any of our most significant customers would result in a decline in our revenue and cash available to pay dividends to our common stockholders.
Our five most significant customers collectively accounted for 35%, 35% and 33% of our revenues during the years ended December 31, 2025, 2024 and 2023, respectively. Our services are provided to these customers pursuant to contract operations service agreements, which generally have an initial term of 12 to 36 months, or generally up to 60 months for the largest horsepower units in our fleet, and continue thereafter until terminated by either party with 30 days’ advance notice. The loss of all or even a portion of the services we provide to these customers, as a result of competition or otherwise, could have a material adverse effect on our business, results of operations and financial condition.
Many of our contract operations service agreements have short initial terms and are cancelable on short notice after the initial term, and we cannot be sure that such contracts will be extended or renewed after the end of the initial contractual term. Any such non-renewals, or renewals at reduced rates or the loss of contracts with any significant customer could adversely impact our business, results of operations, financial condition and cash flows.
The length of our contract operations service agreements with customers varies based on operating conditions and customer needs. Our initial contract terms typically are not long enough to enable us to recoup the cost of the equipment we utilize to provide contract operations services, and these contracts are typically cancelable on short notice after the initial term. We cannot be sure that a substantial number of these contracts will be extended or renewed by our customers or that any of our customers will continue to contract with us. The inability to negotiate extensions or renew a substantial portion of our contract operations services contracts, the renewal of such contracts at reduced rates, the inability to contract for additional services with our customers or the loss of all or a significant portion of our services contracts with any significant customer could lead to a reduction in revenue and net income and could require us to record asset impairments. Moreover, we have limited ability to increase prices during our initial contract terms. As a result, we are unable to pass increases in the prices of the equipment, materials and services we utilize to provide contract operations services, as a result of inflation, tariffs, or otherwise, onto our customers, which could result in a reduction in net income. This could have a material effect upon our business, results of operations, financial condition and cash flows.
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Labor and Supply Chain Risks
Our ability to manage and grow our business effectively may be adversely affected if we lose management or operational personnel.
We believe that our ability to hire, train and retain qualified personnel will continue to be challenging and important. The supply of experienced operational and field personnel, in particular, decreases as other energy companies’ needs for the same personnel increase. Our ability to grow and to continue our current level of service to our customers will be adversely impacted if we are unable to successfully hire, train and retain these important personnel. In addition, the cost of labor has increased and may continue to increase in the future with increases in demand, which could require us to incur additional costs and negatively impact our results of operations.
We depend on particular suppliers and are vulnerable to product shortages and price increases. With respect to our suppliers of newly–fabricated compression equipment specifically, we occasionally experience long lead times, and therefore may at times make purchases in anticipation of future business. If we are unable to purchase compression equipment or other integral equipment, materials and services from third-party suppliers, we may be unable to retain existing customers or compete for new customers, which could have a material adverse effect on our business, results of operations, financial condition and cash flows.
Some equipment, materials and services used in our business are obtained from a limited group of suppliers. Our reliance on these suppliers involves several risks, including price increases (as a result of inflation, tariffs or otherwise), inferior quality and a potential inability to obtain an adequate supply of such equipment, materials and services in a timely manner. Additionally, we occasionally experience long lead times from our suppliers of newly–fabricated compression equipment and may at times make purchases in anticipation of future business. We do not have long–term contracts with some of these suppliers, and the partial or complete loss of certain of these suppliers could have a negative impact on our results of operations and could damage our customer relationships.
If we are unable to purchase compression equipment, in particular, on a timely basis to meet the demands of our customers, our existing customers may terminate their contractual relationships with us, or we may not be able to compete for business from new or existing customers, which, in each case, could have a material adverse effect on our business, results of operations and financial condition. Further, supply chain bottlenecks could adversely affect our ability to obtain necessary materials, parts or lube oil used in our operations or increase the costs of such items. A significant increase in the price of such equipment, materials and services, as a result of inflation, tariffs or other factors, could have a negative impact on our business, results of operations, financial condition and cash flows.
Information Technology and Cybersecurity Risks
We may not realize the intended benefits of our process and technology transformation project, which could have an adverse effect on our business, results of operations and financial condition.
We utilize technology in all aspects of our business to drive operational efficiencies and enhance our value proposition to our customers. Our investments have focused on implementing cloud-based solutions to replace legacy systems, the automation of workflows, integration of digital and mobile tools for our field service technicians and expanded remote monitoring capabilities of our compression fleet. The implementation of the process and technology transformation project has required significant capital and other resources from which we may not realize the benefits we expect to realize. Any such difficulties could have an adverse effect on our business, results of operations and financial condition.
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Cyber-attacks or terrorism could affect our business, results of operations and our reputation.
We rely on our information technology systems and data for critical operations. We own and manage some of these technology systems, but also rely on the systems provided by a host of third-party service providers, vendors, and business partners. We and certain of our third-party providers collect, maintain and process data about customers, employees, business partners and others, including personally identifiable information, as well as proprietary information belonging to our business, such as trade secrets. We are subject to numerous and evolving cybersecurity risks and threats, including cyber-attacks, computer viruses and terrorism that threaten the confidentiality, integrity and availability of critical technology systems or information and may disrupt our operations and harm our operating results. Our industry requires the continued operation of sophisticated information technology systems and network infrastructure. Any integration of AI in our or relevant third parties’ operations, products or services is expected to pose new and/or unknown cybersecurity risks and challenges. In addition, we have acquired and may continue to acquire companies with cybersecurity and/or unsophisticated security measures, which us to significant cybersecurity, operational, and financial risks.
Despite our implementation of security measures, our technology systems and data are vulnerable to material compromises, disruption and failures due to social engineering/phishing, malware (including ransomware), malfeasance by insiders, human or technological error, hacking, viruses, and as a result of bugs, misconfigurations or exploited vulnerabilities in software or hardware, acts of war or terrorism and other causes. Given the complexity of our technology systems, which includes operational technology deployed in the field, we are unable to comprehensively identify, patch or mitigate against all security vulnerabilities. In addition, a successful cyberattack against a critical third party could materially impact our operations and financial results, and because we cannot control the scope or effectiveness of the security measures deployed by our third-party suppliers and service providers, such as cloud services that support our internal and customer-facing operations, that or result in access to third-party technology systems can materially impact our operations and financial results. We and certain of our third-party providers have experienced and other , and we expect such attacks and to occur in the future. While to date no have had any material operational or financial impact, we cannot guarantee that material will not occur in the future.
Cyberattacks are expected to accelerate on a global basis in frequency and magnitude as threat actors are increasingly sophisticated in using techniques and tools, including generative and other AI, that circumvent security controls, evade detection and remove forensic evidence. As a result, there is no guarantee that we will detect, investigate, remediate or recover from future attacks or incidents, or avoid a material adverse impact to our systems or information. There also can be no assurance that our cybersecurity risk management program and processes, including our policies, controls or procedures, will be fully implemented, complied with or effective in protecting our systems and information. If our information technology systems were to fail and we were unable to recover in a timely way, we may be unable to fulfill critical business functions, which could have a material effect on our business, results of operations and financial condition.
The nature of our industry and assets makes us a target for terrorist activities designed to disrupt our ability to service our customers. Increased cybersecurity regulations and an escalating cyber terrorist threat environment are expected to require additional investments in security that we cannot currently predict. We are also subject to evolving cybersecurity and data privacy laws and regulations that are increasingly complex. Failure to comply with these laws and regulations could result in significant legal liability, regulatory investigations and penalties, or harm to our reputation in the marketplace. The implementation of security requirements and measures and the maintenance of insurance, to the extent available, addressing such activities could significantly increase costs. We cannot guarantee that any costs and liabilities incurred in relation to an attack or incident, such as lost business, penalties or damages, will be covered by our existing insurance policies or that applicable insurance will be available to us in the future on economically reasonable terms or at all. These types of events could materially affect our business and results of operations. In addition, these types of events could require significant management attention and resources and could affect our reputation among customers and the public.
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Tax-related Risks
Tax legislation and administrative initiatives or challenges to our tax positions could adversely affect our results of operations and financial condition.
We operate or are registered in locations throughout the U.S. and Canada and, as a result, we are subject to the tax laws and regulations of U.S. federal, state and local and Canadian governments. We have investments in unconsolidated affiliates that operate in the U.S. and international locations. From time to time, various legislative or administrative initiatives may be proposed that could adversely affect our tax positions. There can be no assurance that our tax provision or tax payments will not be adversely affected by these initiatives. In addition, U.S. federal, state and local, and international tax laws and regulations are extremely complex and subject to varying interpretations. There can be no assurance that our tax positions will not be challenged by relevant tax authorities or that we would be successful in any such challenge.
Our ability to use NOLs and interest expense limitation carryovers to offset future income may be limited.
Our ability to use any NOLs and interest expense limitation carryovers generated by us could be substantially limited if we were to experience an “ownership change” as defined under Section 382 of the Code. In general, an “ownership change” would occur if our “5-percent stockholders,” as defined under Section 382 of the Code, including certain groups of persons treated as “5-percent stockholders,” collectively increased their ownership in us by more than 50 percentage points over a rolling three-year period. An ownership change can occur as a result of a public offering of our common stock, as well as through secondary market purchases of our common stock and certain types of reorganization transactions. We have experienced ownership changes, which may result in an annual limitation on the use of our pre–ownership change NOLs (and certain other losses and/or credits) equal to the equity value of our stock immediately before the ownership change, multiplied by the long-term tax-exempt rate for the month in which the ownership change occurred. During the year ended December 31, 2019, the IRS proposed regulations that would prevent us from using unrealized built-in gains to increase this limitation. If these regulations were finalized and we experienced an ownership change our ability to use our NOLs (and certain other and/or credits) may be limited. Such a could, for any given year, have the effect of increasing the amount of our U.S. federal and state income tax liability, which would impact the amount of after–tax cash available for distribution to our stockholders and our financial condition.
Legal and Regulatory Risks
From time to time, we are subject to various claims, tax audits, litigation and other proceedings that could ultimately be resolved against us and require material future cash payments or charges, which could impair our financial condition, results of operations or cash flows.
The size, nature and complexity of our business make us susceptible to various claims, tax audits, litigation and binding arbitration proceedings. We are currently, and may in the future become, subject to various claims, which, if not resolved within amounts we have accrued, could have a material adverse effect on our financial position, results of operations or cash flows, including our ability to pay dividends. Similarly, any claims, even if fully indemnified or insured, could negatively impact our reputation among our customers and the public and make it more difficult for us to compete effectively or obtain adequate insurance in the future. See Part I, Item 3 “Legal Proceedings” of this Form 10-K and Note 16 (“Commitments and Contingencies”) to our Financial Statements for additional information regarding certain legal proceedings to which we are a party.
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New regulations, proposed regulations and proposed modifications to existing regulations under the CAA, if implemented, could result in increased compliance costs.
In June 2016, the EPA issued final regulations under the CAA amending the NSPS for the oil and natural gas source category and applying to sources of emissions of methane and VOC from certain processes, activities and equipment that is constructed, modified or reconstructed after September 18, 2015. Specifically, the regulation imposed both methane and VOC standards for several emission sources not previously covered by the NSPS, such as fugitive emissions from compressor stations and pneumatic pumps and methane standards for certain emission sources that are already regulated for VOC, such as equipment leaks at natural gas processing plants. The amendments also established methane standards for a subset of equipment that the NSPS regulates, including reciprocating compressors and pneumatic controllers, and extend the VOC standards to the remaining unregulated equipment.
In March 2024, the EPA published even more stringent rules with respect to methane and VOC for new and existing sources, via NSPS Subparts OOOOb and OOOOc, with the OOOOb rules for sources constructed, modified, or reconstructed after December 6, 2022, which became effective on May 7, 2024. The OOOOc rules for existing sources give the States a two-year deadline to develop and submit to EPA plans for addressing emissions from those sources. However, EPA issued a direct interim final rule in July 2025 and a final rule in December 2025 that pushed the substantive deadlines in OOOOb and OOOOc back to January 2027. EPA has also been working on a proposed rule to roll back significant portions of the OOOOb and OOOOc, which rule proposal is in interagency review at the White House Office of Management and Budget and is expected for publication soon.
In April 2024, BoLM published a separate final rule, known as the “Waste Prevention, Production Subject to Royalties, and Resource Conservation” rule, to address methane emissions from oil and gas activities on public lands, which became effective on June 10, 2024. The rule is currently stayed pending litigation in North Dakota, Texas, Montana, Wyoming, and Utah. Among the newly adopted methane requirements that may impact our operations are broader applicability to compression equipment relative to the existing rules, increased work practices and inspection requirements and mandates for certain new zero-emissions equipment. Notably, however, in November 2025, BoLM announced that it will not enforce requirements of the rule that carried a December 10, 2025 deadline until December 10, 2026.
Both the EPA rules and the BoLM rules are subject to ongoing judicial challenges.
Meanwhile, several states — including, most notably, New Mexico and Colorado — have continued to develop their own more stringent methane rules that will or are anticipated to impose additional requirements on the industry. For example, Colorado’s Air Quality Control Commission adopted the “Midstream Rule” on December 20, 2024, to address GHG emissions from midstream oil and gas operations, including from natural gas compressor stations. Under the Midstream Rule, midstream facilities were required to begin taking steps to reduce GHG emissions from combustion fuel equipment by February 14, 2025, and are required to meet certain GHG emissions limits by the end of 2030. The Midstream Rule is subject to ongoing judicial challenges.
We do not believe that these rules will have a material adverse impact on our business, financial condition, results of operations or cash flows, but we cannot yet definitively predict the impact of any revision of the current rules or issuance of new rules, the impact of which could be material.
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In October 2015, the EPA issued a new NAAQS ozone standard of 70 ppb, which is a tightening from the 75-ppb standard set in 2008. This new standard became effective on December 28, 2015, and the EPA completed designating attainment/non–attainment regions under the revised ozone standard in 2018. In November 2016, the EPA proposed an implementation rule for the 2015 NAAQS ozone standard, but the agency has yet to issue a final implementation rule. State implementation of the revised NAAQS could result in stricter permitting requirements, delay or prohibit our customers’ ability to obtain such permits and result in increased expenditures for pollution control equipment, the costs of which could be significant. By law, the EPA must review each NAAQS every five years. In December 2018 and again in December 2020, the EPA announced that it was retaining without revision the 2015 NAAQS ozone standard. In June 2021, the EPA commenced a process for reconsidering the December 2020 decision. In August 2023, the EPA announced a new review of the ozone NAAQS and most recently released reports on December 23, 2024, related to its review. We do not believe continued implementation of the NAAQS ozone standard will have a material adverse impact on our business, financial condition, results of operations or cash flows, but we cannot yet predict the impact, if any, of any new Federal Implementation Plan involving new NAAQS standards.
New environmental regulations and proposals similar to these, when finalized, and any other new regulations requiring the installation of more sophisticated pollution control equipment or the adoption of other environmental protection measures, could have a material adverse impact on our business, financial condition, results of operations and cash flows. Notably, opposition to energy development and infrastructure projects has led to regulatory and judicial challenges to new facilities, including compression facilities, in many states. While we have not directly faced any such challenges to the facilities at which we provide contract operations and know of no pending or threatened efforts targeting those facilities, expanded opposition to energy infrastructure, including facilities at which we provide contract operations or in the future might otherwise have an opportunity to provide contract operations, could potentially give rise to material impacts in the future.
We are subject to a variety of governmental regulations; failure to comply with these regulations may result in administrative, civil and criminal enforcement measures and changes in these regulations could increase our costs or liabilities.
We are subject to a variety of U.S. federal, state and local laws and regulations, including relating to the environment, health and safety, labor and employment and taxation. We have investments in unconsolidated affiliates that are subject to U.S. and international regulations. Many of these laws and regulations are complex, change frequently, are becoming increasingly stringent, and the cost of compliance with these requirements can be expected to increase over time. Failure to comply with these laws and regulations may result in a variety of administrative, civil and criminal enforcement measures, including assessment of monetary penalties, imposition of remedial requirements and issuance of injunctions as to future compliance. From time to time, as part of our operations, including newly acquired or potential future contract operations, we may be subject to compliance audits by regulatory authorities in the various states in which we operate.
Environmental laws and regulations may, in certain circumstances, impose strict liability for environmental contamination, which may render us liable for remediation costs, natural resource damages and other damages as a result of our conduct that was lawful at the time it occurred or the conduct of, or conditions caused by, prior owners or operators or other third parties. In addition, where contamination may be present, it is not uncommon for neighboring landowners and other third parties to file claims for personal injury, property damage and recovery of response costs. Remediation costs and other damages arising as a result of environmental laws and regulations, and costs associated with new information, changes in existing environmental laws and regulations or the adoption of new environmental laws and regulations could be substantial and could negatively impact our financial condition, profitability and results of operations. Moreover, failure to comply with these environmental laws and regulations may result in the imposition of administrative, civil and and the issuance of or prohibiting operations.
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We may need to apply for or amend facility permits or licenses from time to time with respect to storm water or wastewater discharges, waste handling, or air emissions relating to manufacturing activities or equipment operations, which subjects us to new or revised permitting conditions that may be onerous or costly to comply with. In addition, certain of our customer service arrangements may require us to operate, on behalf of a specific customer, petroleum storage units such as underground tanks or pipelines and other regulated units, all of which may impose additional compliance and permitting obligations. Any failure to obtain or delay in obtaining required permits, licenses and other governmental approvals by our customers could result in production delays and thereby indirectly materially and adversely impact our operations and business.
We conduct operations at numerous facilities in a wide variety of locations across the continental U.S. The operations at many of these facilities require environmental permits or other authorizations. Additionally, natural gas compressors at many of our customers’ facilities require individual air permits or general authorizations to operate under various air regulatory programs established by rule or regulation. These permits and authorizations frequently contain numerous compliance requirements, including monitoring and reporting obligations and operational restrictions, such as emission limits. Given the large number of facilities in which we operate, and the numerous environmental permits and other authorizations that are applicable to our operations, we may occasionally identify or be notified of violations of certain requirements existing in various permits or other authorizations. Occasionally, we have been assessed penalties for non–compliance, and we could be subject to such penalties in the future. We have not been subject to any penalties to date that have materially and adversely impacted or are expected to materially and adversely impact our operations or business.
We routinely deal with oil, natural gas and other petroleum products. Hydrocarbons or other hazardous substances or wastes may have been disposed or released on, under or from properties used by us to provide contract operations services or inactive compression storage or on or under other locations where such substances or wastes have been taken for disposal. These properties may be subject to investigatory, remediation and monitoring requirements under environmental laws and regulations, and such requirements may vary.
The modification or interpretation of existing environmental laws or regulations, the more vigorous enforcement of existing environmental laws or regulations, or the adoption of new environmental laws or regulations may also negatively impact oil and natural gas exploration and production, gathering and pipeline companies, including our customers, which in turn could have a negative impact on us.
Climate change legislation, regulatory initiatives and stakeholder pressures could result in increased compliance costs, financial risks and potential reduction in demand for our services.
Climate change legislation and regulatory initiatives may arise from a variety of sources, including international, national, regional and state levels of government and associated administrative bodies, s eeking to restrict or regulate emissions of GHGs such as carbon dioxide and methane.
Congress and various federal and state legislative and regulatory bodies have previously considered legislation to restrict or regulate emissions of GHG. Energy legislation and other initiatives continue to be proposed that may be relevant to GHG emissions issues. For example, the SEC adopted rules in March 2024 that would have mandated extensive disclosure for certain public companies of climate-related data, risks and opportunities, including financial impacts, physical and transition risks, related governance and strategy, and greenhouse gas emissions. The SEC stayed those rules in April 2024, however, and in March 2025 voted not to defend the rules against ongoing legal challenges. Those legal challenges remain in abeyance pending an SEC decision on whether to rescind, repeal, or modify the rules but, in the meantime, the SEC climate rules remain suspended and without effect.
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Almost half of the states, either individually or through multi–state regional initiatives, have begun to address GHG emissions, primarily through the planned development of emission inventories or regional GHG cap and trade programs. Various states, such as California, Colorado and New York have passed or proposed similar climate change disclosure laws. Although most of the state–level initiatives have to date been focused on large sources of GHG emissions, such as electric power plants, it is possible that smaller sources such as our natural gas–powered compressors could become subject to GHG–related regulation. Depending on the particular program, we could be required to control emissions or to purchase and su r render allowances for GHG emissions resulting f rom our operations. Our customers or other business partners may require us to provide additional climate-related information if they are also subject to these or additional climate-related disclosure laws or regulations. These actions could result in increased (i) costs to operate and maintain our facilities, (ii) capital expenditures to install new emission controls on our facilities, and (iii) costs to administer and manage any potential GHG emissions regulations or carbon trading or tax programs. Such climate-related disclosure requirements could result in increased compliance costs, and possible litigation and reputational risks if such disclosures are incomplete, inaccurate, misleading or do not otherwise meet the expectations of our stakeholders. Moreover, such requirements may not always be uniform across jurisdictions, which may result in increased complexity and cost for compliance. In addition, we may take voluntary steps to mitigate any impact our operations might have on climate change. As a result, we may experience increases in energy, transportation and raw material costs, capital expenditures or insurance premiums; however, there is no guarantee that such efforts will have the effects.
The $1 trillion legislative infrastructure package passed by Congress in November 2021 included a number of climate-focused spending initiatives targeted at climate resilience, enhanced response and preparation for extreme weather events, and clean energy and transportation investments. Significant additional legislative action by Congress also occurred in August 2022 with the Inflation Reduction Act, signed into law by the former administration, which provided $391 billion in funding for research and development and incentives for low-carbon energy production methods, carbon capture, and other programs directed at encouraging de-carbonization and addressing climate change. The IRA also amended the Clean Air Act to include a Methane Emissions and Waste Reduction Incentive Program for petroleum and natural gas systems. This program required the EPA to impose a “waste emissions charge” on certain natural gas and oil sources that were already required to report under EPA’s GHG Reporting Program. In November 2024, the EPA released its final rule to implement the methane emissions fee with an effective date in January 2025, which was expected to apply to reporting year 2024 emissions. Twenty-three states have filed a lawsuit challenging the rule, and the change in U.S. presidential administration provides additional uncertainty as to the rule’s future. While the current administration issued an executive order pausing the disbursement of all unspent funds appropriated through the IRA and rolling back these environmental policies implemented during the former administration, with legislative action culminating in the One Big Bill Act, which eliminated most of the Inflation Reduction Act’s incentives and the commencement of the methane waste emissions charge on oil and gas sources by a decade to 2034. Notably, Congress eliminated EPA’s regulations in support of the waste emissions charge using the Congressional Review Act on March 14, 2025 and, as of September 12, 2025, EPA has proposed to the GHG Reporting Program for oil and gas sources until 2034 and to eliminate such reporting for all other sources. U.S. climate leaders have vowed to continue for climate although major new climate legislation seems unlikely in the immediate future. Such legislation, regulations, and initiatives, as well as uncertainty regarding the future of such regulations and initiatives in reducing demand for oil and gas, could indirectly affect our business and our results of operations by reducing demand for our services.
Separately, the EPA has promulgated regulations controlling GHG emissions under its existing CAA authority. The EPA has adopted rules requiring many facilities, including petroleum and natural gas systems, to inventory and report their GHG emissions. As noted above, in September 2025, EPA proposed to suspend those requirements until 2034. In 2025, we did not operate any facilities that were subject to these reporting obligations. In addition, the EPA rules provide air permitting requirements for certain large sources of GHG emissions. The requirement for large sources of GHG emissions to obtain and comply with permits will affect some of our and our customers’ largest new or modified facilities going forward but is not expected to cause us to incur material costs. As noted above, the EPA has previously undertaken efforts to regulate emissions of methane, considered a GHG, in the oil and gas sector, and could develop additional, more stringent rules at some point in the future.
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In an executive order issued in January 2021, the former administration asked the heads of all executive departments and agencies to review and take action to address any federal regulations, orders, guidance documents, policies and any similar agency actions promulgated during the prior administration that may be inconsistent with or present obstacles to the administration’s stated goals of protecting public health and the environment, and conserving national monuments and refuges. The executive order also established an Interagency Working Group on the Social Cost of Greenhouse Gases, which is called on to, among other things, capture the full costs of GHG emissions, including the “social cost of carbon,” “social cost of nitrous oxide” and “social cost of methane,” which are “the monetized damages associated with incremental increases in greenhouse gas emissions,” including “changes in net agricultural productivity, human health, property damage from increased flood risk, and the value of ecosystem services.” In early 2025, however, the new administration disbanded the Working Group and withdrew all of its published guidance, ordering EPA to review whether and how to use the social cost of carbon in federal permitting and regulatory decisions and directing the agencies in the meantime to follow OMB regulatory analysis guidance from 2003 that is virtually silent on climate. The current administration also released a series of executive orders impacting the energy sector, ranging from declaring a national emergency due to the U.S.’s energy supply, infrastructure, and prices, to halting wind energy leasing and promoting fossil fuel exploration. These executive orders are already reshaping the current direction of the U.S. climate agenda and have led to rulemaking actions by EPA that are beginning to undo U.S. climate regulation, including a February 12, 2026 final rule the 2009 CAA finding respecting GHGs and all federal GHG emissions standards for vehicles and engines. At this time, we cannot determine how the current administration will continue to proceed and cannot accurately predict the ensuing impact of climate-related policy shifts on our business, financial condition, results of operations and cash flows.
At the international level, the U.S. joined the international community at the 21st COP of the UNFCCC in Paris, France, which resulted in the “Paris Agreement,” which intended for signatory countries to nationally determine their contributions and set GHG emission reduction goals every five years beginning in 2020. While the Paris Agreement did not impose direct requirements on emitters, national plans to meet its pledge resulted in new regulatory requirements. After withdrawing from the Paris Agreement in November 2020, the U.S. re-entered the Paris Agreement in April 2021 along with a new “nationally determined contribution” that the U.S. would achieve GHG emissions reductions of at least 50% relative to 2005 levels by 2030. In November 2021, at COP26 in Glasgow, the U.S. and European Union jointly announced the launch of the “Global Methane Pledge,” by which signatory countries aim to cut global methane pollution at least 30% by 2030 relative to 2020 levels, including “all feasible reductions” in the energy sector. The December 2023 COP28 meeting in Dubai reaffirmed commitments to the Paris Agreement and concluded that the world should move away from fossil fuel energy in a just, orderly, and equitable manner and aim to achieve net zero GHG emissions by 2050, while recognizing a transitional role for fossil fuels. In November 2024, at COP29 in Azerbaijan, countries agreed on the final building blocks that set out how carbon markets will operate under the Paris Agreement, among other outcomes that further indicate the global push to mitigate climate change. However, the current administration issued an executive order in January 2025 that initiated the process to withdraw the U.S. from the Paris Agreement and from any commitments made under the UNFCCC. COP30 took place in Brazil in November 2025 with no official participation or representatives attending from the U.S. In January 2026, the U.S. officially withdrew from the Paris Agreement. Just as we cannot fully anticipate the impact of the methane rules discussed above, we also cannot predict whether the withdrawal from or potential future re-entry into the Paris Agreement or other international pledges will result in any particular new federal regulatory requirements or whether such requirements will cause us to incur material costs. Nevertheless, several states and geographic regions in the U.S. have adopted legislation and regulations to reduce emissions of GHGs, including cap and trade regimes and commitments that contribute to meeting the goals of the Paris Agreement.
Increasingly, parties have sought to bring suit against various natural gas and oil companies alleging that the companies have been aware of the adverse effects of climate change but defrauded their investors or customers by failing to adequately disclose those impacts. Any such litigation targeting our customers could negatively impact their operations and, in turn, decrease demand for our operations, which could have an adverse impact on our financial condition.
In sum, any legislation, regulatory programs or social pressures related to climate change could increase our costs and require substantial capital, compliance, operating and maintenance costs, reduce demand for our services and reduce our access to financial markets. Current, as well as potential future, laws and regulations that limit GHG emissions or that otherwise promote the use of renewable energy over fossil fuel energy sources could increase the cost of our services and, thereby, further reduce demand and adversely affect our sales volumes, revenues and margins.
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A climate–related decrease in demand for oil and natural gas could negatively affect our business.
Supply and demand for oil and natural gas is dependent upon a variety of factors, many of which are beyond our control. These factors include, among others, the potential adoption of new government regulations, including those related to fuel conservation measures and climate change regulations, technological advances in fuel economy and energy generation devices. For example, legislative, regulatory or executive actions intended to reduce emissions of GHG could increase the cost of consuming crude oil and natural gas, thereby potentially causing a reduction in the demand for such products. A broader transition to alternative fuels or energy sources, whether resulting from potential new government regulation, carbon taxes or consumer preferences could result in decreased demand for crude oil, natural gas and NGLs. In addition, increased focus of our customers on reducing emissions from, or the use of, combustion engines in compression could increase demand for electric compressors or require us to make modifications to our existing natural gas-powered units. Any decrease in demand for these products could consequently reduce demand for our services and could have a negative effect on our business.
Also, recent activism directed at shifting funding away from companies with fossil fuel energy-related assets could result in a reduction of funding for the energy sector overall. Numerous climate lawsuits have been filed against the world’s largest oil, gas, and coal producing corporations, with the number of cases filed against fossil fuel companies each year nearly tripling since the Paris Agreement was reached in 2015. Such actions could adversely impact our business by distracting management and other personnel from their primary responsibilities, require us to incur increased costs, and/or result in reputational harm. Moreover, any such litigation targeting our customers could negatively impact their operations and, in turn, decrease demand for our services. Such shareholder activism in relation to environmental, social and governance matters could have an adverse effect on our ability to obtain external financing as well as negatively affect the cost of, and terms for, financing to fund capital expenditures or other aspects of our business. Attention to climate change and other ESG risks has also resulted in governmental and public and private , which could increase our costs or otherwise affect our business.
Climate change may increase the frequency and severity of weather events that could result in severe personal injury, property and environmental damage, which could curtail our or our customers’ operations and otherwise materially adversely affect our cash flows.
Some scientists have concluded that increasing concentrations of GHG in the Earth’s atmosphere may produce climate changes that have significant weather–related effects, such as increased frequency and severity of storms, droughts, hurricanes, blizzards, floods and other climatic events, in addition to more chronic changes such as shifting temperature, precipitation, and other meteorological patterns. If any of those effects were to occur, they could have an adverse effect on our assets and operations, including, but not limited to, damages to our or our customers’ facilities and assets from powerful wind or rising waters. We may experience increased insurance costs, or difficulty obtaining adequate insurance coverage, for our assets in areas subject to more frequent severe weather. We may not be able to recoup these increased costs through the rates we charge our customers. Extreme weather events could cause damage to property or facilities that could exceed our insurance coverage, and our business, financial condition and results of operations could be adversely affected. Such impacts may be proportionately more given the geographical concentration of our operations. These could further result in evacuation of personnel, of services, of the transportation of products and materials, and of productivity.
Another possible consequence of climate change is increased volatility in seasonal temperatures. The market for natural gas and natural gas liquids is generally impacted by periods of colder weather and warmer weather, so any changes in climate could affect the market for those fuels, and thus demand for our services. Increased energy use due to weather changes may require us to invest in additional equipment to serve increased demand. A decrease in energy use due to weather changes may negatively affect our financial condition through decreased revenues. Despite the use of the term “global warming” as a shorthand for climate change, some studies indicate that climate change could cause some areas to experience temperatures substantially colder than their historical averages. As a result, it is difficult to predict how the market for our services could be affected by increased temperature volatility.
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Environmental, social and governance scrutiny and changing expectations from stakeholders may impose additional costs or additional risks.
In recent years, attention has been given to corporate activities related to ESG matters. A number of advocacy groups, both domestically and internationally, have campaigned for governmental and private action to promote change at public companies related to ESG matters, including demands for action related to climate change, promoting the use of substitutes to fossil fuel products and encouraging the divestment of companies in the fossil fuel industry. Various members of the investment community, including investment advisors, sovereign wealth funds, public pension funds, universities, and other groups, have begun promoting the divestment of fossil fuel equities as well as pressuring lenders and other financial services companies and their regulators, such as the Federal Reserve, to limit or curtail activities with fossil fuel companies. These efforts could have a material adverse effect on the price of our securities and our ability to access equity capital markets. Members of the investment community have also begun to screen companies like ours for sustainability performance, including practices related to GHGs and climate change, and through the use of ESG ratings or otherwise, before investing in our securities. As a result, we could experience additional costs or financial penalties, or projects, and/or reduced production and reduced demand, which could have a material effect on our earnings, cash flows, and financial condition. If we do not adapt to or comply with expectations and standards on ESG matters, as they continue to evolve, or if we are perceived to have not responded appropriately to the growing for ESG issues, regardless of whether there is a legal requirement to do so, we may from reputational , and our business, financial condition and/or stock price could be materially and affected.
Our operations, projects and growth opportunities require us to have strong relationships with various key stakeholders, including our shareholders, employees, suppliers, customers, local communities and others. We may face pressures from stakeholders, many of whom may be concerned by climate change, to prioritize sustainable energy practices, reduce our carbon footprint and promote sustainability while at the same time remaining a successfully operating public company. If we do not successfully manage expectations across these varied stakeholder interests, it could erode our stakeholder trust and thereby affect our brand and reputation. The lack of an established single approach to identifying, measuring, and reporting on many ESG matters may further create uncertainty and ambiguities. Failure to realize or timely achieve progress on such aspirational goals, targets, cost estimates, and other expectations or assumptions may adversely impact us. ESG ratings could also lead to further increased sentiment towards us, our customers, and our industry, impacting us and our access to and costs of capital. Such of confidence could impact our business through decreased demand and growth , in projects, increased legal action and regulatory oversight, press coverage and other public statements, hiring and retaining top talent, obtaining necessary approvals and permits from governments and regulatory agencies on a timely basis and on acceptable terms, and securing investors and access to capital. The occurrence of any of the foregoing could have a material effect on our business and financial condition.
