Item 1A. Risk Factors
You should carefully consider each of the risks described below, together with all other information contained in this report in connection with an investment in our debt securities. If any of the following risks develop into actual events, our business, financial condition, results of operations, or cash flows could be materially adversely affected.
Business and Operating Risks
Substantial declines in commodity prices or extended periods of low commodity prices adversely affect our business, financial condition, results of operations and cash flows and our ability to meet our capital expenditure needs and financial commitments.
The prices we receive for sales of our crude oil and natural gas production impact our revenue, profitability, cash flows, access to capital, capital budget, rate of growth, and carrying value of our properties. Crude oil and natural gas are commodities and prices are subject to wide fluctuations in response to relatively minor changes in supply and demand. Historically, the markets for crude oil and natural gas have been volatile and unpredictable and commodity prices will likely remain volatile in the future.
The prices we receive for sales of our production depend on numerous factors beyond our control. These factors include, but are not limited to, the following:
worldwide, domestic, and regional economic conditions impacting the supply of, and demand for, crude oil, natural gas, and natural gas liquids;
the actions of the Organization of Petroleum Exporting Countries (“OPEC”) and other petroleum producing nations;
the nature, extent, and impact of domestic and foreign governmental laws, regulations, and taxation, including environmental laws as well as regulations governing the imposition of trade restrictions and foreign and domestic tariffs;
executive, regulatory or legislative actions by Congress, the Presidential Office, states, or the governments of foreign countries in which we operate;
geopolitical events and conditions, including political uncertainty in the United States or Argentina, or foreign regime changes that impact government energy policies;
the level of global, national, and regional crude oil and natural gas exploration and production activities;
the level of global, national, and regional crude oil and natural gas inventories, which may be impacted by economic sanctions applied to certain producing nations;
the level and effect of speculative trading in commodity futures markets;
the relative strength of the United States dollar compared to foreign currencies and foreign currency exchange rates relative to the United States dollar;
the price and quantity of imports of foreign crude oil;
the price and quantity of exports of crude oil or liquefied natural gas from the United States;
military and political conditions in, or affecting other, crude oil-producing and natural gas-producing nations, including the continuation of, or any increase in the severity of, conflicts in Ukraine, the Middle East and the potential for conflict in South America;
localized supply and demand fundamentals;
the cost and availability, proximity and capacity of transportation, processing, storage and refining facilities for various quantities and grades of crude oil, natural gas, and natural gas liquids;
adverse climatic conditions, natural disasters, and national and global health epidemics and concerns;
technological advances affecting energy production and consumption;
the effect of worldwide energy conservation and greenhouse gas emission limitations or other environmental protection efforts;
the impact arising from increasing attention to environmental, social, and governance (“ESG”) matters; and
the price and availability of alternative fuels or other energy sources.
Sustained material declines in commodity prices reduce cash flows available for capital expenditures, repayment of indebtedness and other corporate purposes; may limit our ability to borrow money or raise additional capital; and may reduce our proved reserves and the amount of crude oil and natural gas we can economically produce.
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In addition to reducing our revenue, cash flows and earnings, depressed prices for crude oil and/or natural gas may adversely affect us in a variety of other ways. If commodity prices decrease substantially, some of our exploration and development projects could become uneconomic, and we may also have to make significant downward adjustments to our estimated proved reserves and our estimates of the present value of those reserves. If these price effects occur, or if our estimates of production or economic factors change, accounting rules may require us to write down the carrying value of our crude oil and/or natural gas properties.
Lower commodity prices may also lead to reductions in our drilling and completion programs, which may result in insufficient production to satisfy our transportation and processing commitments. If production is not sufficient to meet our commitments we would incur deficiency fees that would need to be paid absent any cash inflows generated from the sale of production.
Lower commodity prices may also reduce our access to capital and lead to a downgrade or other negative rating action with respect to our credit rating. A downgrade of our credit rating could negatively impact our cost of capital, increase borrowing costs under our revolving credit facility, and limit our ability to access debt capital markets and execute aspects of our business plans. As a result, substantial declines in commodity prices or extended periods of low commodity prices may materially and adversely affect our future business, financial condition, results of operations, cash flows, liquidity and ability to meet our capital expenditure needs and commitments.
The ability or willingness of Saudi Arabia and other members of OPEC, and other oil exporting nations, including Russia, to set and maintain production levels has a significant impact on crude oil prices.
OPEC is an intergovernmental organization that seeks to manage the price and supply of crude oil on the global energy market. Actions taken by OPEC members, including those taken alongside other oil exporting nations such as Russia, may have a significant impact on global oil supply and pricing. There can be no assurance that OPEC members and other oil exporting nations will comply with agreed-upon production targets, agree to further production targets in the future, or utilize other actions to support and stabilize oil prices, nor can there be any assurance they will not increase production or deploy other actions aimed at reducing oil prices. Uncertainty regarding future actions to be taken by OPEC members, including the potential impact of military action or civil unrest in Venezuela, or other oil exporting countries could lead to increased volatility in the price of oil, which could have a material adverse effect on our business, financial condition, results of operations, and cash flows.
Drilling for and producing crude oil and natural gas are high risk activities with many uncertainties that could adversely affect our business, financial condition or results of operations. We may not be insured for, or our insurance may be inadequate to protect us against, these risks.
Our future financial condition and results of operations depend on the success of our exploration, development and production activities. Our crude oil and natural gas exploration and production activities are subject to numerous risks, including the risk that drilling will not result in commercially viable crude oil or natural gas production. Our decisions to purchase, explore, or develop prospects or properties will depend in part on the evaluation of data obtained through geophysical and geological analyses, production data, and engineering studies, the results of which are often inconclusive or subject to varying interpretations. Our cost of drilling, completing and operating wells may be uncertain before drilling commences.
Our management has specifically identified prospects and scheduled drilling locations as an estimation of our future multi-year drilling activities on our existing acreage. Our ability to drill and develop these locations is subject to a number of risks and uncertainties as described herein. If future drilling results do not establish sufficient reserves to achieve an economic return, we may curtail our drilling and completion activities. Prospects we decide to drill that do not produce crude oil or natural gas in expected quantities may adversely affect our results of operations, financial condition, and rates of return on capital employed. The use of seismic data and other technologies and the study of producing fields in the same area will not enable us to know conclusively prior to drilling whether crude oil or natural gas will be present in expected or economically producible quantities. We cannot assure you the wells we drill will be as productive as anticipated or whether the analogies we draw from other wells, more fully explored prospects, or producing fields will be applicable to our drilling prospects. Because of these uncertainties, we do not know if our potential drilling locations will ever be drilled or if we will be to produce crude oil or natural gas from these or any other potential drilling locations in sufficient quantities to an economic return.
Risks we face while drilling include, but are not limited to, failing to place our well bore in the desired target producing zone; not staying in the desired drilling zone while drilling horizontally through the formation; failing to run our casing the entire length of the well bore; and not being able to run tools and other equipment consistently through the horizontal well bore. Risks we face while completing our wells include, but are not limited to, not being able to fracture stimulate the planned number of stages; failing to run tools the entire length of the well bore during completion operations; not successfully cleaning out the well bore after completion of the final fracture stimulation stage; increased seismicity in areas near our completion activities; unintended interference of completion activities performed by us or by third parties with nearby operated or non-operated wells being drilled, completed, or producing; and failure of our optimized completion techniques to yield expected levels of production.
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Further, many factors may occur that cause us to curtail, delay or cancel scheduled drilling and completion projects, including but not limited to:
abnormal pressure or irregularities in geological formations;
shortages of or delays in obtaining equipment or qualified personnel;
shortages of or delays in obtaining components used in fracture stimulation processes such as water and proppants;
delays associated with suspending our operations to accommodate nearby drilling or completion operations being conducted by other operators;
mechanical difficulties, fires, explosions, equipment failures or accidents, including ruptures of pipelines or storage facilities, or train derailments;
restrictions on the use of underground injection wells for disposing of waste water from oil and gas activities;
political events, public protests, civil disturbances, terrorist acts or cybersecurity attacks;
decreases in, or extended periods of low, crude oil and natural gas prices;
title issues or issues with concessions granted by governments in foreign countries where we have operations;
environmental hazards, such as uncontrollable flows of crude oil, natural gas, brine, well fluids, hydraulic fracturing fluids, toxic gas or other pollutants into the environment, including groundwater and shoreline contamination;
adverse climatic conditions and natural disasters;
spillage or mishandling of crude oil, natural gas, brine, well fluids, hydraulic fracturing fluids, toxic gas or other pollutants by us or by third party service providers;
limitations in infrastructure, including transportation, processing, refining and exportation capacity, or markets for crude oil and natural gas; and
delays imposed by or resulting from compliance with regulatory requirements including permitting.
Any of the above risks could adversely affect our ability to conduct operations or result in substantial losses to us as a result of:
injury or loss of life;
damage to or destruction of property, natural resources and equipment;
pollution and other environmental damage;
regulatory investigations and penalties;
suspension of our operations;
repair and remediation costs; and
litigation.
We are not insured against all risks associated with our business. We may elect to not obtain insurance if we believe the cost of available insurance is excessive relative to the risks presented or for other reasons. In addition, pollution and environmental risks are generally not fully insurable.
Losses and liabilities arising from any of the above events could hinder our ability to conduct normal operations and could adversely affect our business, financial condition, results of operations and cash flows.
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Reserve estimates depend on many assumptions that may turn out to be inaccurate. Any material inaccuracies in our reserve estimates or underlying assumptions will materially affect the quantities and present value of our reserves. The Company's current estimates of reserves could change, potentially in material amounts, in the future due to changes in commodity prices, business strategies, and other factors. Additionally, unless we replace our crude oil and natural gas reserves, our total reserves and production will decline, which could adversely affect our cash flows and results of operations.
The process of estimating crude oil and natural gas reserves is complex and inherently imprecise. It requires interpretation of available technical data and many assumptions, including assumptions relating to current and future economic conditions, production rates, drilling and operating expenses, and commodity prices. Any significant inaccuracy in these interpretations or assumptions could materially affect our estimated quantities and value of our reserves. See Part I, Item 1. Business—Crude Oil and Natural Gas Operations—Proved Reserves for information about our estimated crude oil and natural gas reserves as of December 31, 2025.
In order to prepare reserve estimates, we must project production rates and the amount and timing of development expenditures. We must also analyze available geological, geophysical, production and engineering data in preparing reserve estimates. The extent, quality and reliability of this data can vary which in turn can affect our ability to model the porosity, permeability and pressure relationships in unconventional resources. The process also requires economic assumptions, based on historical data projected into the future, about crude oil and natural gas prices, drilling and operating expenses, capital expenditures, taxes, and availability of funds.
Actual future production, crude oil and natural gas sales prices, revenues, taxes, development expenditures, operating expenses and quantities of recoverable crude oil and natural gas reserves will vary and could vary significantly from our estimates. Any significant variance could materially affect the estimated quantities and value of our reserves, which in turn could have an adverse effect on the value of our assets. In addition, we may remove or adjust estimates of proved reserves, potentially in material amounts, to reflect production history, results of exploration and development activities, changes in business strategies, prevailing crude oil and natural gas prices and other factors, some of which are beyond our control.
In addition, the development of our proved undeveloped reserves may take longer than anticipated and may not be ultimately developed or produced. At December 31, 2025, approximately 43% of our total estimated proved reserves (by volume) were undeveloped. Recovery of undeveloped reserves requires significant capital expenditures and successful drilling operations. Our reserve estimates assume we can and will make these expenditures and conduct these operations successfully. These assumptions may not prove to be accurate. Our reserve report at December 31, 2025 includes estimates of total future development costs over the next five years associated with our proved undeveloped reserves of approximately $8.6 billion. We cannot be certain the estimated costs of the development of these reserves are accurate, development will occur as scheduled, or the results of such development will be as estimated. If we choose not to spend the capital to develop these reserves, or if we are not otherwise able to successfully develop these reserves as a result of our inability to fund necessary capital expenditures or otherwise, we may be required to remove the associated volumes from our reported proved reserves. Proved undeveloped reserves generally must be drilled within five years from the date of initial booking under SEC reserve rules. Changes in the timing of development plans that impact our ability to develop such reserves in the required time frame have resulted, and may in the future result, in fluctuations in reserves between periods as reserves booked in one period may need to be removed in a subsequent period.
Additionally, unless production is established within the spacing units covering the undeveloped acres on which some of the locations are identified, the leases for such acreage will expire. If we are not able to renew leases before they expire, any proved undeveloped reserves associated with such leases will be removed from our proved reserves. The combined net acreage expiring in the next three years represents 33% of our total net undeveloped acreage at December 31, 2025.
Furthermore, unless we conduct successful exploration, development and exploitation activities or acquire properties containing proved reserves, our proved reserves will decline as those reserves are produced. Producing crude oil and natural gas reservoirs are generally characterized by declining production rates that vary depending upon reservoir characteristics and other factors. Our future crude oil and natural gas reserves and production, and therefore our cash flows and results of operations, are highly dependent on our success in efficiently developing our current reserves and economically finding or acquiring additional recoverable reserves. We may not be able to develop, find or acquire sufficient additional reserves to replace our current and future production. If we are unable to replace our current and future production, the value of our reserves will decrease, and our business, financial condition and results of operations could be materially adversely affected.
Our business depends on crude oil and natural gas transportation, processing, refining, and export facilities, most of which are owned by third parties.
The value we receive for our crude oil and natural gas production depends in part on the availability, proximity and capacity of gathering, pipeline and rail systems and processing, refining, and export facilities owned by third parties. The inadequacy or
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unavailability of capacity on these systems and facilities could result in the shut-in of producing wells, the delay or discontinuance of development plans for properties, or higher operational costs associated with air quality compliance controls. Although we have some contractual control over the transportation of our products, changes in these business relationships or failure to obtain such services on acceptable terms could adversely affect our operations. If our production becomes shut-in for any of these or other reasons, we will be unable to realize revenue from those wells until other arrangements are made for the sale or delivery of our products and acreage lease terminations could result if production is shut-in for a prolonged period.
The disruption of transportation, processing, refining, or export facilities due to contractual disputes or litigation, labor disputes, maintenance, civil disturbances, international trade disputes, public protests, terrorist attacks, cybersecurity attacks, adverse climatic events, natural disasters, seismic events, health epidemics and concerns, changes in tax and energy policies or tariffs, federal, state and international regulatory developments, including such developments in foreign countries where we have operations, geopolitical conflicts, changes in supply and demand, equipment failures or accidents, including pipeline and gathering system ruptures or train derailments, and general economic conditions could negatively impact our ability to achieve the most prices for our crude oil and natural gas production. We have no control over when or if access to such facilities would be restored or the impact on prices in the areas we operate. A significant -in of production in connection with any of the aforementioned items could materially affect our cash flows, and if a substantial portion of the impacted production fulfills transportation or processing commitments or is hedged at lower than market prices, those commitments or financial hedges would have to be paid from borrowings in the of sufficient operating cash flows.
Our operated crude oil and natural gas production is ultimately transported to downstream market centers primarily using transportation facilities and equipment owned and operated by third parties. From time to time we may sell our operated crude oil production at market centers to third parties who then subsequently export and sell the crude oil in international markets. We do not currently own or operate infrastructure used to facilitate the transportation and exportation of crude oil; however, third party compliance with regulations that impact the transportation or exportation of our production may increase our costs of doing business and inhibit a third party's ability to transport and sell our production, whether domestically or internationally, the consequences of which could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Our exploration, development and exploitation projects require substantial capital expenditures. We may be unable to obtain needed capital or financing on acceptable terms, which could lead to a decline in our crude oil and natural gas reserves, production and revenues.
The crude oil and natural gas industry is capital intensive. We make and expect to continue to make substantial capital expenditures in our business for the exploration, development, exploitation, production and acquisition of crude oil and natural gas reserves. We monitor and adjust our capital spending plans upward or downward depending on market conditions. Our 2026 capital budget, based on our current expectations of commodity prices, foreign currency exchange rates, and costs, is expected to be funded from operating cash flows. However, the sufficiency of our cash flows from operations is subject to a number of variables, including but not limited to:
the prices at which crude oil and natural gas are sold;
the volume of our proved reserves;
the volume of crude oil and natural gas we are able to produce and sell from existing wells; and
our ability to acquire, locate and produce new reserves;
If oil and gas industry conditions weaken as a result of low commodity prices or other factors, we may not be able to generate sufficient cash flows and may have limited ability to obtain the capital necessary to sustain our operations at current or planned levels. A decline in cash flows from operations may require us to revise our capital program or seek financing in banking or debt capital markets to fund our operations.
We have a revolving credit facility with lender commitments totaling $1.80 billion that matures in October 2029, which date may be extended for up to two additional one-year periods subject to lender consent. In the future, we may not be able to access adequate funding under our revolving credit facility if our lenders are unwilling or unable to meet their funding obligations or increase their commitments under the credit facility. Our lenders could decline to increase their commitments based on our financial condition, the financial condition of our industry or the economy as a whole or for other reasons beyond our control. Due to these and other factors, we cannot be certain that funding, if needed, will be available to the extent required or on terms we find acceptable. If operating cash flows are insufficient and we are unable to access funding or execute debt capital transactions when needed on acceptable terms, we may not be able to fully implement our business plans, fund our capital program and commitments, complete new property acquisitions to replace reserves, take advantage of business , respond to competitive pressures, or refinance debt
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obligations as they come due. Should any of the above risks occur, they could have a material adverse effect on our business, financial condition, results of operations and cash flows.
The unavailability or high cost of drilling rigs, well completion crews, water, equipment, supplies, personnel and field services could adversely affect our ability to execute our exploration and development plans within budget and on a timely basis.
In the regions in which we operate, there may be shortages of drilling rigs, well completion crews, equipment, personnel, field services, and supplies, including key components used in fracture stimulation processes such as water and proppants, as well as high costs associated with these critical components of our operations. With current technology, water is an essential component of drilling and hydraulic fracturing processes. The availability of water sources and disposal facilities is becoming increasingly competitive, constrained, subject to social and regulatory scrutiny, and impacted by third-party supply chains over which we may have limited control. Limitations or restrictions on our ability to secure, transport, and use sufficient amounts of water, including limitations resulting from natural causes such as drought, could adversely impact our operations. In some cases, water may need to be obtained from new sources and transported to drilling or completion sites, resulting in increased costs.
The demand for qualified and experienced field service providers and associated equipment, supplies, and materials can fluctuate significantly, often in correlation with commodity prices or supply chain disruptions, causing periodic shortages and/or higher costs. Any of these factors may cause costs to rise which could have a material adverse effect on our business, financial condition, results of operations and cash flows.
We have been an early entrant into new or emerging plays. As a result, our drilling results in these areas are uncertain, and the value of our undeveloped acreage will decline if drilling results are unsuccessful.
While our costs to acquire undeveloped acreage in new or emerging plays have generally been less than those of later entrants into a developing play, our drilling results in new or emerging areas are more uncertain than drilling results in developed and producing areas. Since new or emerging plays have limited or no production history, we are unable to use past drilling results in those areas to help predict our future drilling results. As a result, our cost of drilling, completing and operating wells in these areas may be higher than initially expected, and the value of our undeveloped acreage in the emerging areas may decline if drilling results are unsuccessful.
We have limited control over the activities on properties we do not operate.
Some of the properties in which we have an ownership interest are operated by other companies and involve third-party working interest owners. As of December 31, 2025, non-operated properties represented 10% of our estimated proved developed reserves, 4% of our estimated proved undeveloped reserves, and 7% of our estimated total proved reserves. We have limited ability to influence or control the operations or future development of non-operated properties, including the marketing of oil and gas production, compliance with environmental, occupational safety and health and other regulations, or the amount of expenditures required to fund the development and operation of such properties. Moreover, we are dependent on other working interest owners on these projects to fund their contractual share of capital and operating expenditures. These limitations and our dependence on the operators and other working interest owners for these projects could cause us to incur unexpected future costs and could have a material adverse effect on our business, financial condition, results of operations and cash flows.
We may be subject to risks in connection with acquisitions, divestitures, and joint development arrangements.
As part of our business strategy, we have made and expect to continue making acquisitions of oil and gas properties, divest assets, and enter into joint development arrangements. The successful acquisition of oil and gas properties requires an assessment of several factors, including but not limited to:
reservoir modeling and evaluation of recoverable reserves;
future crude oil and natural gas prices and location and quality differentials;
the quality of the title or the concession granted with respect to acquired properties;
the ability to access future drilling locations;
availability and cost of gathering, processing, and transportation facilities;
availability and cost of drilling and completion equipment and of skilled personnel;
future development and operating costs and potential environmental and other liabilities;
regulatory, permitting and similar matters; and
with respect to foreign operations, the long-term stability of the government, legal and regulatory regimes within a given country.
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The accuracy of these acquisition assessments is inherently uncertain. In connection with these assessments, we perform a review, which we believe to be generally consistent with industry practices, of the subject properties. Our review will not reveal all existing or potential problems nor will it permit us to become sufficiently familiar with the properties to fully assess their deficiencies and capabilities prior to acquisition. Inspections may not always be performed on every property, and environmental problems are not necessarily observable even when an inspection is undertaken. Even when problems are identified, the seller of the subject properties may be unwilling or unable to provide effective contractual protection against all or part of the problems. We sometimes are not entitled to contractual indemnification for environmental liabilities and acquire properties on an “as is” basis. Significant acquisitions and other strategic transactions may involve other risks that may impact our business, including:
diversion of our management's attention to evaluating, negotiating and integrating significant acquisitions and strategic transactions;
operating a larger organization in new geographic areas;
the challenge and cost of integrating acquired assets and operations, including additional regulatory programs, with our preexisting assets and operations while carrying on our ongoing business; and
the failure to realize the full benefit that we expect in estimated proved reserves, production volume, cost savings from operating synergies or other benefits anticipated from an acquisition, or to realize these benefits within the expected time frame.
As a result of our strategy of assessing and executing on accretive acquisitions, the size and geographic footprint of our business has increased and may continue to do so, including into new jurisdictions. Our future success will depend, in part, on our ability to manage our expanded business, which may pose challenges including those related to the management and monitoring of new operations and basins and associated increased costs and complexity. We believe our acquisitions will complement our business strategies by delivering enhanced cash flows and corporate returns, among other things. However, the anticipated benefits of the transactions may be less significant than expected or may take longer to achieve than anticipated. If we are not able to achieve these objectives and realize the anticipated benefits within anticipated timing or at all, our business, financial condition and operating results may be adversely affected.
In addition, from time to time we may sell or otherwise dispose of certain assets as a result of an evaluation of our asset portfolio or to provide cash flow for use in reducing debt and enhancing liquidity. Such divestitures have inherent risks, including possible delays in closing, the risk of lower-than-expected sales proceeds for the disposed assets, and potential post-closing adjustments and claims for indemnification. Additionally, volatility and unpredictability in commodity prices may result in fewer potential bidders, unsuccessful sales efforts, and a higher risk that buyers may seek to terminate a transaction prior to closing. The occurrence of any of the matters described above could have an adverse impact on our business, financial condition, results of operations and cash flows.
Volatility in the financial markets or in global economic conditions, including consequences resulting from domestic political uncertainty in the United States or countries where we operate, geopolitical events, international trade disputes and domestic and foreign tariffs, and health epidemics could adversely impact our business.
United States and global economies may experience periods of volatility and uncertainty from time to time, resulting in unstable consumer confidence, diminished consumer demand and spending, diminished liquidity and credit availability, and inability to access capital markets. In recent years, certain global economies have experienced periods of political uncertainty, slowing economic growth, rising interest rates, inflation, changing economic sanctions, health-related concerns, and currency volatility. These global macroeconomic conditions may have a negative impact on commodity prices and the availability and cost of materials used in our industry, which in turn could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Trade restrictions or other governmental actions related to domestic and foreign tariffs or trade policies have impacted in the past, and have the potential to further impact, our business and industry by increasing the cost of materials used in various aspects of upstream, midstream, and downstream oil and gas activities. Furthermore, tariffs and any quantitative import restrictions, particularly those impacting the cost and availability of steel and aluminum, and certain manufactured production equipment, may cause disruption in the energy industry's supply chain, resulting in the delay or cessation of drilling and completion efforts or the postponement or cancellation of new pipeline transportation projects, as well as endangering U.S. liquefied natural gas export projects resulting in negative impacts on natural gas production. Additionally, trade and/or tariff disputes have impacted in the past, and have the potential to further impact, domestic and global economies overall, which could result in reduced demand for crude oil and natural gas. Any of the above consequences could have a material adverse effect on our business, financial condition, results of operations and cash flows.
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A cybersecurity incident or events impacting our operational systems or other digital technology could result in information theft, data corruption, operational disruption, and/or financial loss.
Our business and industry has become increasingly dependent on digital technologies to conduct day-to-day operations including certain exploration, development and production activities. We rely heavily on digital technologies, including information and operational systems and related infrastructure as well as artificial intelligence (AI), cloud applications and services, to process and record financial and operating data; analyze seismic, drilling, completion and production information; manage production equipment; conduct reservoir modeling and reserves estimation; communicate with employees and business associates; perform compliance reporting and many other activities. The availability and integrity of these systems are essential for us to conduct our operations. Our business associates, including employees, vendors, service providers, financial institutions, and transporters, processors, and purchasers of our production are also heavily dependent on digital technology. The use of AI and machine-learning technologies by us and our business associates presents emerging risks that could adversely affect our business, financial condition, results of operations, and reputation. As with many technological innovations, there are significant risks and challenges involved in deploying AI and machine-learning technologies and there can be no assurance that the usage of such technologies will always enhance our operations or be to our business, including our or . These technologies are rapidly evolving and may not perform as intended in our environments or under field conditions, and can produce outputs that are , biased, , , or otherwise .
As dependence on digital technologies has increased, cybersecurity and data privacy incidents, including deliberate attacks or unintentional events, have also evolved and increased in frequency. Cybersecurity attacks are becoming more sophisticated and advancements in AI may also heighten our exposure to cybersecurity-related threats as malicious actors may use generative AI to improve or expand cybersecurity attack techniques and capabilities. Our technologies, systems, networks, and those of our business associates have been and continue to be the target of cybersecurity attacks that include, but are not limited to, malicious software, surveillance, credential stuffing, spear phishing, social engineering, use of deepfakes (i.e., highly realistic synthetic media generated by AI), ransomware attacks, attempts to gain unauthorized access to data, and other information security breaches, and which could lead to disruptions in systems, release or theft of confidential or protected information, of data, of operating activities, in maintaining our books and records, environmental , communication or other of our business operations. For example, there have been well-publicized cases in recent years involving cybersecurity attacks on software vendors utilized by the Company. In response to those , we deployed our cybersecurity response protocols and took steps to contain and remediate potential . As of the date of this report, we are not aware of any material compromises to our operations as a result of the attacks; however, other similar attacks in the future could have a significant impact on our systems and operations.
A cybersecurity attack or other data privacy incident involving our information or operational systems and related infrastructure, and/or that of our business associates and customers, could disrupt our business and negatively impact our operations in a variety of ways, including but not limited to unauthorized access to, or theft of, confidential, sensitive or proprietary information, data corruption, interruption of operating activities, challenges in maintaining our books and records, environmental damage, communication interruptions or operational disruption that adversely affects our ability to carry on our business. Any such event could damage our reputation and lead to financial losses from remedial actions, loss of business, legal or proceedings, costs, regulatory and enforcement, and , increased costs for compliance requirements or potential liability, which could have a material effect on our business, financial condition, results of operations or cash flows. In addition, certain cybersecurity such as reconnaissance of our systems and those of our business associates, may remain for an extended period, which could result in significant consequences. We do not maintain specialized insurance for possible liability resulting from cybersecurity attacks due to of coverage for what we consider sensitive and proprietary data.
While the Company maintains cybersecurity systems and controls, disclosure controls and procedures and incident response protocols, these systems, controls, procedures and protocols may not identify all risks and threats we face, or may fail to protect data or mitigate the adverse effects of data loss. No security measure is infallible.
As of the date of this report, we do not believe that the Company has experienced any material losses relating to cybersecurity attacks; however, there can be no assurance that we will not suffer material losses in the future either as a result of a breach of our systems or those of our business associates. As cybersecurity threats continue to evolve, we may be required to expend significant additional resources to modify or enhance our protective measures or to investigate and remediate any information security vulnerabilities. Additionally, the growth of cybersecurity attacks and emerging digital technologies has resulted in evolving legal and compliance matters which may impose significant costs that may increase over time.
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Competition in the crude oil and natural gas industry is intense, making it more difficult for us to acquire properties, market crude oil and natural gas and secure trained personnel.
Our ability to acquire additional prospects and find and develop reserves in the future will depend on our ability to evaluate and select suitable properties and to consummate transactions in a highly competitive environment for acquiring properties, securing long-term transportation and processing capacity, marketing crude oil and natural gas, and securing trained personnel. Also, there is substantial competition for capital available for investment in the crude oil and natural gas industry. Our competitors may possess and employ financial, technical and personnel resources greater than ours. Those companies may be able to pay more for productive crude oil and natural gas properties and exploratory prospects and to evaluate, bid for and purchase a greater number of properties and prospects than our financial or personnel resources permit. Our inability to effectively compete in this environment could have a material adverse effect on our financial condition, results of operations and cash flows.
Severe weather events and natural disasters could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Severe weather events and natural disasters such as hurricanes, tornadoes, seismic events, floods, blizzards, extreme cold, drought, fires, and ice storms affecting the areas in which we operate, including our corporate headquarters, could cause disruptions and in some cases suspension of our or our third party service providers' operations, which could have a material adverse effect on our business. Our planning for normal climatic variation, natural disasters, insurance programs and emergency recovery plans may inadequately mitigate the effects of such climatic conditions, and not all such effects can be predicted, eliminated or insured against. Longer term changes in temperature and precipitation patterns may result in changes to the amount, timing, or location of demand for energy or our production. While we consider these factors in our disaster preparedness and response and business continuity planning, we may not consider or prepare for every eventuality in such planning.
Financial Risks
Our revolving credit facility and indentures for our senior notes contain certain covenants and restrictions, the violation of which could adversely affect our business, financial condition and results of operations.
Our revolving credit facility contains restrictive covenants with which we must comply, including covenants that limit our ability to, among other things, incur additional indebtedness, incur liens, engage in sale and leaseback transactions, and merge, consolidate or sell all or substantially all of our assets. Our revolving credit facility also contains a requirement that we maintain a consolidated net debt to total capitalization ratio of no greater than 0.65 to 1.00. See Part II, Item 8. Notes to Consolidated Financial Statements—Note 8. Debt for a discussion of how this ratio is calculated pursuant to our credit agreement. At December 31, 2025, we had $1.8 billion of available borrowing capacity with no outstanding borrowings under our credit facility and our consolidated net debt to total capitalization ratio, as defined, was 0.18.
The indentures governing our senior notes contain covenants that, among other things, limit our ability to create liens securing certain indebtedness, enter into certain sale and leaseback transactions, and consolidate, merge or transfer certain assets.
Our ability to comply with the provisions of our revolving credit facility or senior note indentures may be impacted by changes in economic or business conditions, results of operations, or events beyond our control. The breach of any covenant could result in a default under our revolving credit facility or senior note indentures, in which case, depending on the actions taken by the lenders or trustees thereunder or their successors or assignees, could result in all amounts outstanding thereunder, together with accrued interest, to be due and payable. If our indebtedness is accelerated, our assets may not be sufficient to repay in full such indebtedness, which would have a material adverse effect our business, financial condition, results of operations, and cash flows.
The inability of joint interest owners, significant customers, and service providers to meet their obligations to us may adversely affect our financial results.
Our principal exposure to credit risk is through the sale of our crude oil and natural gas production, which we market to energy marketing companies, crude oil refining companies, and natural gas gathering and processing companies ($1.02 billion in receivables at December 31, 2025) and our joint interest and other receivables $394.6 million at December 31, 2025). These counterparties may experience insolvency or liquidity issues and may not be able to meet their obligations and liabilities owed to us, particularly during a period of depressed commodity prices. Defaults by these counterparties could adversely impact our financial condition and results of operations.
Additionally, we rely on field service companies and midstream companies for services associated with the drilling and completion of wells and for certain midstream services. A prolonged worsening of commodity prices may result in a material adverse impact on the liquidity and financial position of the parties with whom we do business, resulting in delays in payment of, or non-payment of,
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amounts owed to us, delays in operations, loss of access to equipment and facilities and similar impacts. These events could have an adverse impact on our business, financial condition, results of operations and cash flows.
Legal and Regulatory Risks
Laws, regulations, guidance, executive actions or other regulatory initiatives regarding environmental protection and occupational safety and health could increase our costs of doing business and result in operating restrictions, delays, or cancellations in the drilling and completion of crude oil and natural gas wells, which could have a material adverse effect on our business, results of operations, financial condition and cash flows.
Our crude oil and natural gas exploration and production operations are subject to stringent federal, state, local and foreign government legal requirements governing environmental protection and occupational safety and health. These requirements may take the form of laws, regulations, executive actions and various other legal initiatives. See Part I, Item 1. Business—Regulation of the Crude Oil and Natural Gas Industry for a summary of certain significant environmental and occupational safety and health legal requirements that govern us. Such requirements include those pertaining to air emissions, including natural gas flaring limitations and ozone standards; climate change, including restriction of methane or other greenhouse gas emissions and suspensions of, or more stringent limitations upon, new leasing and permitting on federal lands and waters; hydraulic fracturing; waste water disposal; occupational safety standards, and other risks or regulations relating to environmental protection. One or more of these legal requirements could have a material adverse effect on our business, financial condition, results of operations, and cash flows. In addition, because public policy changes affecting the crude oil and natural gas industry are commonplace and because laws, rules and regulations may be enacted, amended, repealed, or reinterpreted, we are to predict the future cost or impact of complying with such laws, rules and regulations.
We are subject to certain complex federal, state, local and foreign government laws and regulations in areas other than environmental protection and occupational safety and health that could result in increased costs, operating restrictions or delays, limitations or prohibitions on our ability to develop and produce reserves, or expose us to significant liabilities.
Our crude oil and natural gas exploration and production operations are subject to complex and stringent federal, state, local and foreign government laws and regulations in areas other than environmental protection and occupational safety and health, including with respect to production, sales, cash transfers and distributions, and transport of crude oil, NGLs and natural gas, and employees and labor relations.
Failure to comply with laws and regulations, including those summarized in Part I, Item 1. Business—Regulation of the Crude Oil and Natural Gas Industry, may trigger a variety of administrative, civil and criminal enforcement investigations or actions, including investigatory actions, the assessment of monetary penalties, the imposition of remedial requirements, the issuance of orders or judgments limiting or enjoining future operations, criminal sanctions, or litigation. Moreover, changes to existing laws or regulations or changes in interpretations of laws and regulations may unfavorably impact us or the infrastructure used for transporting our products. Similarly, changes in regulatory policies and priorities could result in the imposition of new laws or regulations that adversely impact us or our industry. Any such changes could increase our operating costs, delay our operations or otherwise alter the way we conduct our business, which could have a material adverse effect on our financial condition, results of operations and cash flows.
We operate assets outside of the United States, which exposes us to different legal and regulatory requirements and additional risk.
Beginning in the first quarter of 2026, a portion of our assets are now located in Argentina. Our foreign operations are subject to various risks that could have a material adverse effect on our business, results of operations and financial condition, including political and economic instability from civil unrest; labor strikes; war and other armed conflict; inflation; currency fluctuations, devaluation and conversion restrictions or other factors. Any deterioration of social, political, labor or economic conditions, or affecting a customer with whom we do business, as well as difficulties in staffing, obtaining necessary equipment and supplies and managing foreign operations, may adversely affect our operations or financial results. We are also exposed to the risk of foreign and domestic governmental actions that may: impose additional costs on us; delay permits or otherwise impede our operations; limit or disrupt markets for our operations, restrict payments or limit the movement of funds; impose sanctions on or otherwise restrict our ability to conduct business with certain customers or persons or in certain countries; or result in the of contact rights. Our operations outside the United States may also be affected by changes in trade protection laws, policies and measures, and other regulatory requirements affecting trade and investment, including the Foreign Practices Act and foreign laws prohibiting payments, as well as travel restrictions and import and export regulations.
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Changes in tax laws or tax rulings could materially affect our financial position, results of operations, and cash flows.
Rules and regulations governing U.S. federal, state, Argentine, and local income taxation are continually under review and subject to change. It cannot be predicted if changes to current U.S. or Argentine tax laws and regulations will be introduced as legislation or, if introduced, later enacted and, if enacted, what form such enacted legislation would take. While certain changes to tax laws and regulations may negatively impact our business, certain changes may be beneficial.
Our operations and the operations of our customers are subject to a number of risks arising out of the threat of climate change, energy conservation measures, or initiatives that stimulate demand for alternative forms of energy that could result in increased operating costs, limit the areas in which oil and natural gas production may occur, and reduce the demand for the crude oil and natural gas we produce.
Risks arising out of the threat of climate change, fuel conservation measures, governmental requirements for renewable energy resources, increasing consumer demand for alternative forms of energy, and technological advances in fuel economy and energy generation devices may create new competitive conditions that result in reduced demand for the crude oil and natural gas we produce. The potential impact of changing demand for crude oil and natural gas services and products may have a material adverse effect on our business, financial condition, results of operations and cash flows. Additionally, variability in power generation output from alternative energy facilities that are dependent on weather conditions, such as wind and solar, may result in intermittent changes in demand for the commodities we produce which could lead to increased volatility in commodity prices. One or more of these developments could have an adverse effect on our assets and operations.
Increased attention to environmental, social, and corporate governance matters may impact our business.
Companies across all industries are facing scrutiny from a wide array of stakeholders related to their ESG practices. ESG standards are evolving and if we are perceived to have not responded appropriately or adequately (whether or not such perception is valid) to pursue, implement, or make progress against certain standards, regardless of whether there is a legal requirement to do so, we may suffer from reputational damage and our business or financial condition, could be materially and adversely affected. Attention to climate change, societal expectations on companies to address climate change, and potential consumer use of alternative forms of energy may result in increased costs, reduced demand for hydrocarbon products, reduced profits, increased investigations and litigation, and negative impacts on our ability to recruit necessary talent, and our access to debt capital markets.
Institutional lenders who provide financing for traditional energy companies may become more attentive to lending practices that favor power sources such as wind and solar and some of them may elect not to provide funding for traditional energy companies or impose certain ESG-related targets or goals as a condition to funding. While we cannot predict what polices may result from these developments, such efforts could make it more difficult for traditional companies to secure funding as well as negatively affect the cost of, and terms for, financings to fund growth projects or other aspects of our business.
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