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performance and success are dependent, in part, upon key members of our management and technical team, and their loss or departure
could be detrimental to our future success. You must be willing to rely to a significant extent on our management’s discretion and
judgment. In addition, a significant portion of our employee base is at or near retirement age. Furthermore, we utilize the services of a
number of individual consultants for contractually fixed periods of time. Our inability to retain or recruit qualified personnel may
impair our ability to grow our business and develop our discoveries, which could have a material adverse effect on our results of
operations and financial condition, as well as on the market price of our common stock.
Under the terms of our various license agreements, we are required to drill wells, declare any discoveries and conduct certain
development activities in order to retain exploration and production rights and failure to do so may result in substantial license
renewal costs or loss of our interests in these license areas.
In order to protect our exploration and production rights in our license areas, we must meet various drilling and declaration
requirements. In general, unless we make and declare discoveries within certain time periods specified in our various license
agreements and leases, our interests in the undeveloped parts of our license (as is the case in Angola and Gabon) or the whole block
(as is the case in the deepwater U.S. Gulf of Mexico) areas may lapse and we may be subject to significant penalties or be required to
make additional payments in order to maintain such licenses. For example, pursuant to the terms of the Block 9 RSA, the initial
exploration period with respect to Block 9 offshore Angola will terminate on March 1, 2016 and, on such date we will lose our license
on Block 9. Pursuant to the Block 21 RSA and Executive Decree No. 259/15, the initial exploration period on Block 21 expires on
March 1, 2017. Under the Block 20 PSC, in order to preserve our rights in the block, we will be required to drill four exploration wells
within five years of the signing of the Block 20 PSC, or January 1, 2017, subject to certain extensions. If the Angola Transaction is not
ultimately consummated and we are unable to favorably renegotiate such license terms, we may be unable to meet such deadlines and
may lose our exploration rights on Blocks 20 and 21.
Furthermore, as required by our license agreements in Angola, within thirty days following a successful exploration well, we are
required to submit a declaration of commercial well to Sonangol. Within two years after the date of the declaration of commercial
well, we must submit to Sonangol a formal declaration of commercial discovery. Within three months from the declaration of
commercial discovery, we are required to submit a development plan to Sonangol and the Angola Ministry of Petroleum for review
and approval. Within forty-two months after the formal declaration of commercial discovery, we are required to commence first
production from such discovery. Our failure or inability to meet these deadlines could jeopardize our production rights or result in
forfeiture of our production rights with respect to these projects, which would have a material adverse effect on our results of
operations and financial condition, as well as on the market price of our common stock.
If the Angola Transaction is ultimately not consummated, certain drilling and declaration requirements will be very difficult to
achieve with respect to our Cameia, Orca and Lontra discoveries and may require the need to renegotiate our various license
agreements governing Blocks 20 and 21 offshore Angola with Sonangol. The deadline to file a declaration of commercial discovery
with respect to our Lontra discovery was December 20, 2015. Given the pending Angola Transaction, we did not meet that deadline,
although we requested an extension of this deadline from Sonangol and such extension was denied. Furthermore, Presidential Decree
No. 212/15 was passed on December 2, 2015 which established a new Block 20/15 concession area covering our Lontra discovery. It
is unclear what effect the passage of this Presidential Decree has on our rights under the Block 20 PSC with respect to our Lontra
discovery. If the Angola Transaction is not ultimately consummated, Presidential Decree Laws may need to be passed in Angola,
along with the renegotiation of our Block 20 PSC, in order to preserve our development rights with respect to Lontra. In light of (i) the
apparent conflict between Presidential Decree No. 212/15 and our rights under the Block 20 PSC and (ii) the denial of our request for
an extension of the declaration of commercial discovery deadline with respect to Lontra, we have elected to impair the value of our
Lontra discovery included within current assets held for sale, as reflected in our consolidated financial statements as of December 31,
2015.
In addition, most of our deepwater U.S. Gulf of Mexico blocks have a 10-year primary term, expiring between 2016 and 2025.
Generally, we are required to commence exploration activities or successfully exploit our properties during the primary lease term in
order for these leases to extend beyond the primary lease term. A portion of the leases covering our Shenandoah and Anchor
discoveries are beyond their primary term, and the operator must conduct continuous operations or obtain a Suspension of Production
in order to maintain such leases. The primary terms of certain leases covering our North Platte project are scheduled to expire in
October 2016. If we fail to conduct continuous operations at North Platte following such date or we fail to obtain a Suspension of
Production, such leases may terminate. In addition, certain of our targeted exploration prospects, including our Goodfellow prospect,
have leases that expire within the next year and even if we were to commence exploration activities prior to lease expiration, we could
be required to conduct continuous operations on those prospects if the initial exploration were to be successful. This requirement to
conduct continuous drilling operations may cause us to relinquish such leases despite the fact that an exploration well on such leases
was successful. Accordingly, we and our partners may not be able to drill all of the prospects identified on our leases or licenses prior
to the expiration of their respective terms and we can make no assurances that we, or the operator of the discoveries in which we hold
a non-operated interest, will be able to successfully perpetuate leases through continuous operations or obtaining a Suspension of
