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Participants in the oil and gas industry are subject to complex laws that can affect the cost, manner or feasibility of doing business.
Exploration and production activities in the oil and gas industry are subject to extensive local, state, federal and international
regulations. We may be required to make large expenditures to comply with governmental regulations, particularly in respect of the
following matters:
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licenses and leases for drilling operations;
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foreign exchange and banking;
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royalty increases, including retroactive claims;
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drilling and development bonds and social payment obligations;
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reports concerning operations;
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the spacing of wells;
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unitization of oil accumulations;
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environmental remediation or investigation; and
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taxation.
Under these and other laws and regulations, we could be liable for personal injuries, property damage and other types of
damages for which we may not maintain, or otherwise be protected by, insurance coverage. Failure to comply with these laws and
regulations also may result in the suspension or termination of our operations and subject us to administrative, civil and criminal
penalties. Moreover, these laws and regulations could change in ways that could substantially increase our costs. Any such liabilities,
penalties, suspensions, terminations or regulatory changes 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.
For example, until the closing of the Angola Transaction and the cessation of our operations within Angola, we will be subject
to the Foreign Exchange Law for the Petroleum Sector, which requires, among other things, that all foreign exchange operations be
carried out through Angolan banks, that oil and gas exploration and production companies open local bank accounts in foreign
currencies in order to pay local taxes and to pay for goods and services supplied by non-resident suppliers and service providers, and
also that oil and gas exploration and production companies open local bank accounts in local currency in order to pay for goods and
services supplied by resident suppliers and service providers. See “Business—Laws and Regulations of Angola and Gabon—Angola”
for more information. These new rules require additional compliance efforts and costs on our and other industry participants’ part, and
may in some cases cause delay or other issues in connection with the acquisition of or payments for goods and services. As a result of
the significant downturn in oil and gas prices and recent devaluation of the Angola kwanza versus the U.S. dollar, it has become more
difficult to conduct foreign currency transactions in Angola. Any of these consequences could have a material adverse effect on our
results of operations.
We may be subject to risks in connection with acquisitions and the integration of significant acquisitions may be difficult.
We periodically evaluate acquisitions of prospects and licenses, reserves and other strategic transactions that appear to fit within
our overall business strategy. The successful acquisition of these assets requires an assessment of several factors, including:
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recoverable reserves;
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future oil and natural gas prices and their appropriate differentials;
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development and operating costs; and
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potential environmental, safety, health and other liabilities.
The accuracy of these assessments is inherently uncertain. In connection with these assessments, we perform a review of the
subject assets that we believe to be generally consistent with industry practices. Our review will not reveal all existing or potential
