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Our proved reserves are estimates. Any material inaccuracies in our reserves estimates or assumptions underlying our reserves
estimates could cause the quantities and net present value of our reserves to be overstated or understated.
There are numerous uncertainties inherent in estimating oil and natural gas reserves and their value. Reservoir engineering is a
subjective process of estimating underground accumulations of crude oil and natural gas that cannot be measured in an exact manner.
Because of the high degree of judgment involved, the accuracy of any reserve estimate is inherently imprecise, and a function of the
quality of available data and the engineering and geological interpretation. Our reserves estimates are based on 12-month average
prices; therefore, reserves quantities will change when actual prices increase or decrease. In addition, results of drilling, testing, and
production may substantially change the reserve estimates for a given reservoir over time. The estimates of our proved reserves and
estimated future net revenues also depend on a number of factors and assumptions that may vary considerably from actual results,
including:
•
historical production from an area compared with production from similar producing areas;
•
assumed effects of regulation by governmental agencies and court rulings;
•
assumptions concerning future oil and natural-gas prices, future operating costs and capital expenditures; and
•
estimates of future severance and excise taxes, workover costs, and remedial costs.
For these reasons, estimates of the economically recoverable quantities of oil and natural gas attributable to any particular group
of properties, classifications of those reserves and estimates of the future net cash flows expected from them prepared by different
engineers or by the same engineers but at different times may vary substantially. Accordingly, reserves 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, because our reserves estimates are calculated using volumetric analysis, those
estimates are less reliable than the 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. In addition,
realization or recognition of proved undeveloped reserves will depend on our development schedule and plans. A change in future
development plans for proved undeveloped reserves could cause the discontinuation of the classification of these reserves as proved.
We are not, and may not be in the future, the operator of all our properties, and do not, and may not in the future, hold all of the
working interests in our properties. Therefore, we will not be able to control the timing of exploration or development efforts,
associated costs, or the rate of production of any non-operated and to an extent, any non-wholly owned, assets.
We are not the operator of our Heidelberg, Shenandoah and Anchor projects. The Heidelberg development project commenced
production in January 2016 and is currently our only source of revenue. We are also not the operator on the Diaba Block offshore
Gabon. As a non-operator of Heidelberg, Shenandoah and Anchor, we are subject to additional risks to our business and financial
condition as the ultimate technical, operational and economic success of these projects will depend upon the efforts of our
competitors. The long-term success of our business will depend in part upon whether Heidelberg, Shenandoah and Anchor are
successful from a technical, operational and economic perspective, which we will have limited ability to control or influence as a non-
operator.
As we carry out our exploration and development programs, we may enter into arrangements with respect to existing or future
prospects that result in a greater proportion of our prospects being operated by others. In addition, the terms of our current or future
licenses or leases may require at least the majority of working interests to approve certain actions. As a result, we may have limited
ability to exercise influence over the operations of the prospects operated by our partners or which are not wholly-owned by us, as the
case may be. Dependence on the operator or our partners could prevent us from realizing our target returns for those prospects.
Further, it may be difficult for us to minimize the cycle time between discovery and initial production with respect to prospects for
which we do not operate or wholly-own. The success and timing of exploration and development activities operated by our partners
will depend on a number of factors that will be largely outside of our control, including:
•
the timing and amount of capital expenditures;
•
the operator’s expertise and financial resources;
•
partner, government and regulatory approvals;
