| CARRIZO OIL & GAS INC Item 1A Risk Factors Natural gas and oil drilling is a speculative activity and involves numerous risks and substantial and uncertain costs that could adversely affect us |
| Our success will be largely dependent upon the success of our drilling program |
| Drilling for natural gas and oil involves numerous risks, including the risk that no commercially productive natural gas or oil reservoirs will be discovered |
| The cost of drilling, completing and operating wells is substantial and uncertain, and drilling operations may be curtailed, delayed or canceled as a result of a variety of factors beyond our control, including: • unexpected or adverse drilling conditions; • elevated pressure or irregularities in geologic formations; • equipment failures or accidents; • adverse weather conditions; • compliance with governmental requirements; and • shortages or delays in the availability of drilling rigs, crews and equipment |
| Because we identify the areas desirable for drilling from 3-D seismic data covering large areas, we may not seek to acquire an option or lease rights until after the seismic data is analyzed or until the drilling locations are also identified; in those cases, we may not be permitted to lease, drill or produce natural gas or oil from those locations |
| 23 ______________________________________________________________________ [48]Table of Contents Even if drilled, our completed wells may not produce reserves of natural gas or oil that are economically viable or that meet our earlier estimates of economically recoverable reserves |
| Our overall drilling success rate or our drilling success rate for activity within a particular project area may decline |
| Unsuccessful drilling activities could result in a significant decline in our production and revenues and materially harm our operations and financial condition by reducing our available cash and resources |
| Because of the risks and uncertainties of our business, our future performance in exploration and drilling may not be comparable to our historical performance described in this Form 10-K We may not adhere to our proposed drilling schedule |
| Our final determination of whether to drill any scheduled or budgeted wells will be dependent on a number of factors, including: • the results of our exploration efforts and the acquisition, review and analysis of the seismic data; • the availability of sufficient capital resources to us and the other participants for the drilling of the prospects; • the approval of the prospects by the other participants after additional data has been compiled; • economic and industry conditions at the time of drilling, including prevailing and anticipated prices for natural gas and oil and the availability and prices of drilling rigs and crews; and • the availability of leases and permits on reasonable terms for the prospects |
| Although we have identified or budgeted for numerous drilling prospects, we may not be able to lease or drill those prospects within our expected time frame or at all |
| Wells that are currently part of our capital budget may be based on statistical results of drilling activities in other 3-D project areas that we believe are geologically similar rather than on analysis of seismic or other data in the prospect area, in which case actual drilling and results are likely to vary, possibly materially, from those statistical results |
| In addition, our drilling schedule may vary from our expectations because of future uncertainties |
| Our reserve data and estimated discounted future net cash flows are estimates based on assumptions that may be inaccurate and are based on existing economic and operating conditions that may change in the future |
| There are uncertainties inherent in estimating natural gas and oil reserves and their estimated value, including many factors beyond the control of the producer |
| The reserve data set forth in this Form 10-K represents only estimates |
| Reservoir engineering is a subjective and inexact process of estimating underground accumulations of natural gas and oil that cannot be measured in an exact manner and is based on assumptions that may vary considerably from actual results |
| Accordingly, reserve estimates may be subject to upward or downward adjustment, and actual production, revenue and expenditures with respect to our reserves likely will vary, possibly materially, from estimates |
| Additionally, there recently has been increased debate and disagreement over the classification of reserves, with particular focus on proved undeveloped reserves |
| Changes in interpretations as to classification standards, or disagreements with our interpretations, could cause us to write down these reserves |
| As of December 31, 2005, approximately 80dtta9prca of our proved reserves were proved undeveloped and proved nonproducing |
| Moreover, some of the producing wells included in our reserve reports as of December 31, 2005 had produced for a relatively short period of time as of that date |
| Because most of our reserve estimates are calculated using volumetric analysis, those estimates are less reliable than estimates based on a lengthy production history |
| Volumetric analysis involves estimating the volume of a reservoir based on the net feet of pay of the structure and an estimation of the area covered by the structure based on seismic analysis |
| In addition, realization or recognition of our proved undeveloped reserves will depend on our development schedule and plans |
| Lack of certainty with respect to development plans for proved undeveloped reserves could cause the discontinuation of the classification of these reserves as proved |
| Although we have accelerated our development of the Camp Hill Field in East Texas, we have in the past chosen to delay development of our proved undeveloped reserves in the Camp Hill Field in favor of pursuing shorter-term exploration projects with higher potential rates of return, adding to our lease position in this field and further evaluating additional economic enhancements for this field’s development |
| The discounted future net cash flows included in this Form 10-K are not necessarily the same as the current market value of our estimated natural gas and oil reserves |
| As required by the Commission, the estimated discounted future net cash flows from proved reserves are based on prices and costs as of the date of the estimate |
| Actual future net cash flows also will be affected by factors such as: • the actual prices we receive for natural gas and oil; 24 ______________________________________________________________________ [49]Table of Contents • our actual operating costs in producing natural gas and oil; • the amount and timing of actual production; • supply and demand for natural gas and oil; • increases or decreases in consumption of natural gas and oil; and • changes in governmental regulations or taxation |
| In addition, the 10prca discount factor we use when calculating discounted future net cash flows for reporting requirements in compliance with the Financial Accounting Standards Board Statement of Financial Accounting Standards Nodtta 69 may not be the most appropriate discount factor based on interest rates in effect from time to time and risks associated with us or the natural gas and oil industry in general |
| We depend on successful exploration, development and acquisitions to maintain reserves and revenue in the future |
| In general, the volume of production from natural gas and oil properties declines as reserves are depleted, with the rate of decline depending on reservoir characteristics |
| Except to the extent we conduct successful exploration and development activities or acquire properties containing proved reserves, or both, our proved reserves will decline as reserves are produced |
| Our future natural gas and oil production is, therefore, highly dependent on our level of success in finding or acquiring additional reserves |
| In addition, we are dependent on finding partners for our exploratory activity |
| To the extent that others in the industry do not have the financial resources or choose not to participate in our exploration activities, we will be adversely affected |
| Natural gas and oil prices are highly volatile, and lower prices will negatively affect our financial results |
| Our revenue, profitability, cash flow, future growth and ability to borrow funds or obtain additional capital, as well as the carrying value of our properties, are substantially dependent on prevailing prices of natural gas and oil |
| Historically, the markets for natural gas and oil prices have been volatile, and those markets are likely to continue to be volatile in the future |
| It is impossible to predict future natural gas and oil price movements with certainty |
| Prices for natural gas and oil are subject to wide fluctuation in response to relatively minor changes in the supply of and demand for natural gas and oil, market uncertainty and a variety of additional factors beyond our control |
| These factors include: • the level of consumer product demand; • overall economic conditions; • weather conditions; • domestic and foreign governmental relations; • the price and availability of alternative fuels; • political conditions; • the level and price of foreign imports of oil and liquefied natural gas; and • the ability of the members of the Organization of Petroleum Exporting Countries to agree upon and maintain oil price controls |
| Declines in natural gas and oil prices may materially adversely affect our financial condition, liquidity and ability to finance planned capital expenditures and results of operations |
| 25 ______________________________________________________________________ [50]Table of Contents We face strong competition from other natural gas and oil companies |
| We encounter competition from other natural gas and oil companies in all areas of our operations, including the acquisition of exploratory prospects and proven properties |
| Our competitors include major integrated natural gas and oil companies and numerous independent natural gas and oil companies, individuals and drilling and income programs |
| Many of our competitors are large, well-established companies that have been engaged in the natural gas and oil business much longer than we have and possess substantially larger operating staffs and greater capital resources than we do |
| These companies may be able to pay more for exploratory projects and productive natural gas and oil properties and may be able to define, evaluate, bid for and purchase a greater number of properties and prospects than our financial or human resources permit |
| In addition, these companies may be able to expend greater resources on the existing and changing technologies that we believe are and will be increasingly important to attaining success in the industry |
| Such competitors may also be in a better position to secure oilfield services and equipment on a timely basis or on favorable terms |
| We may not be able to conduct our operations, evaluate and select suitable properties and consummate transactions successfully in this highly competitive environment |
| We may not be able to keep pace with technological developments in our industry |
| The natural gas and oil industry is characterized by rapid and significant technological advancements and introductions of new products and services using new technologies |
| As others use or develop new technologies, we may be placed at a competitive disadvantage, and competitive pressures may force us to implement those new technologies at substantial cost |
| In addition, other natural gas and oil companies may have greater financial, technical and personnel resources that allow them to enjoy technological advantages and may in the future allow them to implement new technologies before we can |
| We may not be able to respond to these competitive pressures and implement new technologies on a timely basis or at an acceptable cost |
| If one or more of the technologies we use now or in the future were to become obsolete or if we are unable to use the most advanced commercially available technology, our business, financial condition and results of operations could be materially adversely affected |
| As of December 31, 2005, we had a material weakness in our internal control, and our internal control over financial reporting was not effective as of that date |
| If we fail to maintain an effective system of internal controls, we may not be able to provide timely and accurate financial statements |
| As more fully described under Item 9A, Controls and Procedures, our management identified a material weakness over the design and effectiveness of internal control over Financial Reporting |
| As more fully described under Item 9A, Controls and Procedures, our management identified three material weaknesses over the effectiveness of our internal controls |
| One weakness was related to our year-end close process and the loss of four accounting and financial staff members during or prior to this process |
| The loss of these four employees created a significant shortage of experience, oil and gas industry knowledge and familiarity with our accounting system |
| The vacancies included the manager of financial reporting, controller, manager of accounting and director of financial planning and analysis |
| We believe these vacancies led to certain errors that required accounting adjustments, including errors related to our capital expenditures accrual, errors in the evaluation of our unproved property pool and errors related to the evaluation of our asset retirement obligation |
| Management also determined that the derivatives entered into during each of 2004 and 2005 lacked sufficient documentation to be accounted for as cash flow hedges |
| In addition these hedges were not properly fair valued during these periods |
| Accordingly, the Company restated its financial statements for 2004 as well as all the quarterly periods in 2004 and the three quarterly periods ended September 30, 2005 |
| These restatements also resulted in us not being able to file our annual report during the time allowed by the Securities and Exchange Commission |
| As a result of the material weaknesses, management concluded that, as of December 31, 2005, we did not maintain effective internal control over financial reporting |
| The Public Company Accounting Oversight Board has defined a material weakness as a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim statements will not be prevented or detected |
| Accordingly, a material weakness increases the risk that the financial information we report contains material errors |
| As more fully described in our annual report on Form 10-K/A for the year ended December 31, 2004, management concluded during 2004 that we did not maintain effective internal control over financial reporting |
| We have implemented initiatives to remediate the material weaknesses in our internal controls |
| We have recently employed three new professional staff to fill vacancies we have |
| The steps we have taken and are taking to address the material weakness may not be effective |
| However, any failure to effectively address a material weakness or other control deficiency or implement required new or improved controls, or difficulties encountered in their implementation, could limit our ability to obtain financing, harm our reputation, disrupt our ability to process key components of our result of operations and financial condition timely and accurately and cause us to fail to meet our reporting obligations under rules of the SEC and our various debt arrangements |
| Any failure to remediate the material weakness identified in our evaluation of our internal controls could preclude our management from determining our internal control over financial reporting is effective or otherwise from issuing in a timely manner our management report in 2007 |
| We could face adverse consequences as a result of our late Form 10-K filing |
| Our inability to timely file this report, which was related to our restatement, may have an adverse impact on us |
| In particular, we expect that we will not be eligible to use a registration statement on Form S-3 for a period of 12 months after becoming current with our filings |
| The inability to use Form S-3 may impair our ability or increase our costs and the complexity of our efforts to raise funds in the public markets |
| We are subject to various governmental regulations and environmental risks |
| Natural gas and oil operations are subject to various federal, state and local government regulations that may change from time to 26 ______________________________________________________________________ [51]Table of Contents time |
| Matters subject to regulation include discharge permits for drilling operations, plug and abandonment bonds, reports concerning operations, the spacing of wells, unitization and pooling of properties and taxation |
| From time to time, regulatory agencies have imposed price controls and limitations on production by restricting the rate of flow of natural gas and oil wells below actual production capacity in order to conserve supplies of natural gas and oil |
| Other federal, state and local laws and regulations relating primarily to the protection of human health and the environment apply to the development, production, handling, storage, transportation and disposal of natural gas and oil, by-products thereof and other substances and materials produced or used in connection with natural gas and oil operations |
| In addition, we may be liable for environmental damages caused by previous owners of property we purchase or lease |
| As a result, we may incur substantial liabilities to third parties or governmental entities and may be required to incur substantial remediation costs |
| Further, we or our affiliates hold certain mineral leases in the State of Montana that require coalbed methane drilling permits, the issuance of which has been challenged in pending litigation |
| We may not be able to obtain new permits in an optimal time period or at all |
| We also are subject to changing and extensive tax laws, the effects of which cannot be predicted |
| Compliance with existing, new or modified laws and regulations could have a material adverse effect on our business, financial condition and results of operations |
| We are subject to various operating and other casualty risks that could result in liability exposure or the loss of production and revenues |
| The natural gas and oil business involves operating hazards such as: • well blowouts; • mechanical failures; • explosions; • uncontrollable flows of oil, natural gas or well fluids; • fires; • geologic formations with abnormal pressures; • pipeline ruptures or spills; • releases of toxic gases; and • other environmental hazards and risks |
| Any of these hazards and risks can result in the loss of hydrocarbons, environmental pollution, personal injury claims and other damage to our properties and the property of others |
| We may not have enough insurance to cover all of the risks we face |
| In accordance with customary industry practices, we maintain insurance coverage against some, but not all, potential losses in order to protect against the risks we face |
| We do not carry business interruption insurance |
| We may elect not to carry insurance if our management believes that the cost of available insurance is excessive relative to the risks presented |
| In addition, we cannot insure fully against pollution and environmental risks |
| The occurrence of an event not fully covered by insurance could have a material adverse effect on our financial condition and results of operations |
| We cannot control the activities on properties we do not operate and are unable to ensure their proper operation and profitability |
| As a result, we have limited ability to exercise influence over, and control the risks associated with, operations of these properties |
| The failure of an operator of our wells to adequately perform operations, an operator’s breach of the applicable agreements or an operator’s failure to act in ways that are in our best interests could reduce our production and revenues |
| The success and timing of our drilling and development activities on properties operated by others therefore depend upon a number of factors outside of our control, including the operator’s 27 ______________________________________________________________________ [52]Table of Contents • timing and amount of capital expenditures; • expertise and financial resources; • inclusion of other participants in drilling wells; and • use of technology |
| The marketability of our natural gas production depends on facilities that we typically do not own or control, which could result in a curtailment of production and revenues |
| The marketability of our production depends in part upon the availability, proximity and capacity of natural gas gathering systems, pipelines and processing facilities |
| We generally deliver natural gas through gas gathering systems and gas pipelines that we do not own under interruptible or short-term transportation agreements |
| Under the interruptible transportation agreements, the transportation of our gas may be interrupted due to capacity constraints on the applicable system, for maintenance or repair of the system, or for other reasons as dictated by the particular agreements |
| Our ability to produce and market natural gas on a commercial basis could be harmed by any significant change in the cost or availability of such markets, systems or pipelines |
| Our future acquisitions may yield revenues or production that varies significantly from our projections |
| In acquiring producing properties, we assess the recoverable reserves, future natural gas and oil prices, operating costs, potential liabilities and other factors relating to the properties |
| Our assessments are necessarily inexact and their accuracy is inherently uncertain |
| Our review of a subject property in connection with our acquisition assessment will not reveal all existing or potential problems or permit us to become sufficiently familiar with the property to assess fully its deficiencies and capabilities |
| We may not inspect every well, and we may not be able to observe structural and environmental problems even when we do inspect a well |
| If problems are identified, the seller may be unwilling or unable to provide effective contractual protection against all or part of those problems |
| Any acquisition of property interests may not be economically successful, and unsuccessful acquisitions may have a material adverse effect on our financial condition and future results of operations |
| Our business may suffer if we lose key personnel |
| We depend to a large extent on the services of certain key management personnel, including our executive officers and other key employees, the loss of any of whom could have a material adverse effect on our operations |
| We have entered into employment agreements with each of SP Johnson IV, our President and Chief Executive Officer, Paul F Boling, our Chief Financial Officer, J Bradley Fisher, our Vice President of Operations, Gregory E Evans, our Vice President of Exploration and Jack Bayless, our Vice President of Land |
| Our success will be dependent on our ability to continue to employ and retain skilled technical personnel |
| We may experience difficulty in achieving and managing future growth |
| We have experienced growth in the past primarily through the expansion of our drilling program |
| Future growth may place strains on our financial, technical, operational and administrative resources and cause us to rely more on project partners and independent contractors, possibly negatively affecting our financial condition and results of operations |
| Our ability to grow will depend on a number of factors, including: • our ability to obtain leases or options on properties, including those for which we have 3-D seismic data; • our ability to acquire additional 3-D seismic data; • our ability to identify and acquire new exploratory prospects; • our ability to develop existing prospects; • our ability to continue to retain and attract skilled personnel; • our ability to maintain or enter into new relationships with project partners and independent contractors; 28 ______________________________________________________________________ [53]Table of Contents • the results of our drilling program; • hydrocarbon prices; and • our access to capital |
| We may not be successful in upgrading our technical, operations and administrative resources or in increasing our ability to internally provide certain of the services currently provided by outside sources, and we may not be able to maintain or enter into new relationships with project partners and independent contractors |
| Our inability to achieve or manage growth may adversely affect our financial condition and results of operations |
| We may continue to enter into derivative transactions to manage the price risks associated with our production |
| Our derivative transactions may result in our making cash payments or prevent us from benefiting to the fullest extent possible from increases in prices for natural gas and oil |
| Because natural gas and oil prices are unstable, we periodically enter into price-risk-management transactions such as swaps, collars, futures and options to reduce our exposure to price declines associated with a portion of our natural gas and oil production and thereby to achieve a more predictable cash flow |
| The use of these arrangements limits our ability to benefit from increases in the prices of natural gas and oil |
| Our derivative arrangements may apply to only a portion of our production, thereby providing only partial protection against declines in natural gas and oil prices |
| These arrangements may expose us to the risk of financial loss in certain circumstances, including instances in which production is less than expected, our customers fail to purchase contracted quantities of natural gas and oil or a sudden, unexpected event materially impacts natural gas or oil prices |
| We have substantial capital requirements that, if not met, may hinder operations |
| We have experienced and expect to continue to experience substantial capital needs as a result of our active exploration, development and acquisition programs |
| We expect that additional external financing will be required in the future to fund our growth |
| We may not be able to obtain additional financing, and financing under existing or new credit facilities may not be available in the future |
| Even if additional capital becomes available, it may not be on terms acceptable to us |
| Without additional capital resources, we may be forced to limit or defer our planned natural gas and oil exploration and development program and thereby adversely affect the recoverability and ultimate value of our natural gas and oil properties, in turn negatively affecting our business, financial condition and results of operations |
| High demand for field services and equipment and the ability of suppliers to meet that demand may limit our ability to drill and produce our oil and natural gas properties |
| This is causing escalating prices, delays in drilling and other exploration activities, the possibility of poor services coupled with potential damage to downhole reservoirs and personnel injuries |
| Such pressures will likely increase the actual cost of services, extend the time to secure such services and add costs for damages due to any accidents sustained from the over use of equipment and inexperienced personnel |
| Our credit facilities contain operating restrictions and financial covenants, and we may have difficulty obtaining additional credit |
| Over the past few years, increases in commodity prices and proved reserve amounts and the resulting increase in our estimated discounted future net revenue have allowed us to increase our available borrowing amounts |
| In the future, commodity prices may decline, we may increase our borrowings or our borrowing base may be adjusted downward, thereby reducing our borrowing capacity |
| Our credit facilities are secured by a pledge of substantially all of our producing natural gas and oil properties and assets, are guaranteed by our subsidiary and contain covenants that limit additional borrowings, dividends, the incurrence of liens, investments, sales or pledges of assets, changes in control, repurchases or redemptions for cash of our common stock, speculative commodity transactions and other matters |
| The credit facilities also require that specified financial ratios be maintained |
| We may not be able to refinance our debt or obtain additional financing, particularly in view of our credit facilities restrictions on our ability to incur additional debt and the fact that substantially all of our assets are currently pledged to secure obligations under the credit facilities |
| The restrictions of our credit facilities and our difficulty in obtaining additional debt financing may have adverse consequences on our operations and financial results including: • our ability to obtain financing for working capital, capital expenditures, our drilling program, purchases of new technology or other purposes may be impaired; 29 ______________________________________________________________________ [54]Table of Contents • the covenants in our credit facilities that limit our ability to borrow additional funds and dispose of assets may affect our flexibility in planning for, and reacting to, changes in business conditions; • because our indebtedness is subject to variable interest rates, we are vulnerable to increases in interest rates; • any additional financing we obtain may be on unfavorable terms; • we may be required to use a substantial portion of our cash flow to make debt service payments, which will reduce the funds that would otherwise be available for operations and future business opportunities; • a substantial decrease in our operating cash flow or an increase in our expenses could make it difficult for us to meet debt service requirements and could require us to modify our operations, including by curtailing portions of our drilling program, selling assets, reducing our capital expenditures, refinancing all or a portion of our existing debt or obtaining additional financing; and • we may become more vulnerable to downturns in our business or the economy |
| In addition, under the terms of our credit facilities, our borrowing base is subject to redeterminations at least quarterly based in part on prevailing natural gas and oil prices |
| In the event the amount outstanding exceeds the redetermined borrowing base, we could be forced to repay a portion of our borrowings |
| We may not have sufficient funds to make any required repayment |
| If we do not have sufficient funds and are otherwise unable to negotiate renewals of our borrowings or arrange new financing, we may have to sell a portion of our assets |
| We may record ceiling limitation write-downs that would reduce our shareholders’ equity |
| We use the full-cost method of accounting for investments in natural gas and oil properties |
| Accordingly, we capitalize all the direct costs of acquiring, exploring for and developing natural gas and oil properties |
| Under the full-cost accounting rules, the net capitalized cost of natural gas and oil properties may not exceed a “ceiling limit” that is based upon the present value of estimated future net revenues from proved reserves, discounted at 10prca, plus the lower of the cost or the fair market value of unproved properties |
| If net capitalized costs of natural gas and oil properties exceed the ceiling limit, we must charge the amount of the excess to operations through depreciation, depletion and amortization expense |
| This charge is called a “ceiling limitation write-down |
| ” This charge does not impact cash flow from operating activities but does reduce our shareholders’ equity |
| The risk that we will be required to write down the carrying value of our natural gas and oil properties increases when natural gas and oil prices are low or volatile |
| In addition, write-downs would occur if we were to experience sufficient downward adjustments to our estimated proved reserves or the present value of estimated future net revenues, as further discussed in “Risk Factors—Our reserve data and estimated discount future net cash flows are estimates based upon assumptions that may be inaccurate and are based on existing economic and operating conditions that may change in the future |
| ” Once incurred, a write-down of natural gas and oil properties is not reversible at a later date |
| See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” for additional information on these matters |
| We participate in oil and natural gas leases with third parties |
| We may own less than 100prca of the working interest in certain leases acquired by us, and other parties will own the remaining portion of the working interest |
| Financial risks are inherent in any operation where the cost of drilling, equipping, completing and operating wells is shared by more than one person |
| We could be held liable for the joint activity obligations of the other working interest owners such as nonpayment of costs and liabilities arising from the actions of the working interest owners |
| In the event other working interest owners do not pay their share of such costs, we would likely have to pay those costs, which could materially adversely affect our financial condition |
| We may incur losses as a result of title deficiencies |
| We purchase working and revenue interests in the natural gas and oil leasehold interests upon which we will perform our exploration activities from third parties or directly from the mineral fee owners |
| The existence of a material title deficiency can render a lease worthless and can adversely affect our results of operations and financial condition |
| Title insurance covering mineral 30 ______________________________________________________________________ [55]Table of Contents leaseholds is not generally available and, in all instances, we forego the expense of retaining lawyers to examine the title to the mineral interest to be placed under lease or already placed under lease until the drilling block is assembled and ready to be drilled |
| As is customary in our industry, we rely upon the judgment of natural gas and oil lease brokers or independent landmen who perform the field work in examining records in the appropriate governmental offices and abstract facilities before attempting to acquire or place under lease a specific mineral interest |
| We, in some cases, perform curative work to correct deficiencies in the marketability of the title to us |
| The work might include obtaining affidavits of heirship or causing an estate to be administered |
| In cases involving more serious title problems, the amount paid for affected natural gas and oil leases can be generally lost, and the target area can become undrillable |
| The threat and impact of terrorist attacks or similar hostilities may adversely impact our operations |
| We cannot assess the extent of either the threat or the potential impact of future terrorist attacks on the energy industry in general, and on us in particular, either in the short-term or in the long-term |
| Uncertainty surrounding such hostilities may affect our operations in unpredictable ways, including the possibility that infrastructure faculties, including pipelines and gathering systems, production facilities, processing plants and refineries, could be targets of, or indirect casualties of, an act of terror or war |