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development activities. Furthermore, the drilling equipment, facilities and infrastructure owned and operated by the third parties we
contract with is highly complex and subject to malfunction and breakdown. Any malfunctions or breakdowns may be outside our
control and result in delays, which could be substantial. Any delays in our drilling campaign caused by equipment, facility or
equipment malfunction or breakdown could materially increase our costs of drilling and cause an adverse effect on our business,
financial position and results of operations.
We only recently began producing oil and gas and our future performance is uncertain.
We only recently began producing oil and gas from our Heidelberg project in which we own just a 9.375% working interest. We
do not produce oil or gas from any of our other properties and do not expect to commence production from those properties for a
significant amount of time. Production from our oil and gas properties will depend upon our ability to execute the appraisal and
development of our projects and progress our projects through the project appraisal and development life-cycle, including the approval
of development plans, obtaining formal project sanction, achieving successful appraisal and development drilling results and
constructing or leasing production facilities and related subsea infrastructure. Our ability to commence production from our other
properties will also depend upon us being able to obtain substantial additional capital funding on a timely basis and attract and retain
adequate personnel. We have only been generating revenue from operations for a very short period of time and expect to generate only
limited revenue from production for several years. Companies in their initial stages of development face substantial business and
financial risks and may suffer significant losses. We have generated substantial net losses and negative cash flows from operating
activities since our inception and expect to continue to incur substantial net losses as we continue our project appraisal and
development activities, our exploration drilling program and our new venture activities. We face challenges and uncertainties in
financial and commercial planning as a result of the complex nature of our business and uncertainties regarding the nature, scope and
results of our future activities and financial commitments. In the event that our appraisal, development or exploration drilling
schedules are not completed, or are delayed, modified or terminated, our operating results will be adversely affected and our
operations will differ materially from the activities described in this Annual Report on Form 10-K. As a result of industry factors or
factors relating specifically to us, we may have to change our methods of conducting business, which may cause a material adverse
effect on our results of operations and financial condition.
The inability of one or more third parties who contract with us to meet their obligations to us may adversely affect our financial
results.
We may be liable for certain costs if third parties who contract with us are unable to meet their commitments under such
agreements. We are currently exposed to credit risk through joint interest receivables from our block and/or lease partners. As a result
of our exploration success, we have a large inventory of development projects which will require significant capital expenditures and
have long development cycle times. Our partners, both in the U.S. Gulf of Mexico and West Africa, must be able to fund their share of
investment costs through the lengthy development cycle, through cash flow from operations, external credit facilities, or other sources,
including project financing arrangements. Our partners may not be successful in obtaining such financing, which could negatively
impact the progress and timeline for development. In addition to project development costs, our partners must also be able to fund
their share of exploration and other operating expenses. The significant decline in oil and gas prices over the past eighteen months
may make it more difficult for our partners to meet their obligations to us under applicable joint operating and other agreements. For
example, as of December 31, 2015, outstanding joint interest and other receivables attributable to our partners in West Africa were
approximately $156.6 million. We may be unable to recover such outstanding amounts, which would materially negatively impact our
liquidity and financial position. Furthermore, in response to the recent decline in oil and gas prices, certain of our partners have
announced significant capital expenditure reductions, which may cause such partners to elect not to participate in the drilling of a
particular exploration or appraisal well with us. This could dramatically increase our share of the costs of such operation and may
cause us to cancel or delay certain operations and may materially adversely impact our liquidity and results of operations.
In addition, if any of the service providers we contract with to conduct development or exploration activities file for bankruptcy
or are otherwise unable to fulfill their obligations to us, we may face increased costs and delays in locating replacement vendors. The
recent severe decline in oil and natural gas prices and the resulting adverse impact on our industry may have an adverse impact on or
contribute to the insolvency of certain third parties from which we contract drilling, development and related oilfield services, as well
as block partners, which in turn could affect such companies’ ability to perform such services for us and result in delays to our
exploration, appraisal and development activities. The inability or failure of third parties we contract with to meet their obligations to
us or their insolvency or liquidation may adversely affect our business, results of operations or financial condition.
We are dependent on certain members of our management and technical team and our inability to retain or recruit qualified
personnel may impair our ability to grow our business.
Our investors must rely upon the ability, expertise, judgment and discretion of our management and the success of our technical
team in identifying, discovering and developing oil reserves and progressing our development projects toward first production. Our
