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business partners, could disrupt our business plans and negatively impact our operations. Although to date we have not experienced
any cyber-attacks, there can be no assurance that we will not be the target of cyber-attacks in the future or suffer such losses related to
any cyber-incident. As cyber threats continue to evolve, we may be required to expend significant additional resources to continue to
modify or enhance our protective measures or to investigate and remediate any information security vulnerabilities.
We and our operations are subject to numerous environmental, health and safety regulations which may result in material
liabilities and costs.
We are, and our future operations will be, subject to various international, foreign, federal, state and local environmental, health
and safety laws and regulations governing, among other things, the emission and discharge of pollutants into the ground, air or water,
the generation, storage, handling, use and transportation of regulated materials and the health and safety of our employees. We are
required to obtain various environmental permits from governmental authorities for our operations, including drilling permits for our
wells. There is a risk that we have not been or will not be at all times in complete compliance with these permits and the
environmental laws and regulations to which we are subject. If we violate or fail to comply with these laws, regulations or permits, we
could be fined or otherwise sanctioned by regulators, including through the revocation of our permits or the suspension or termination
of our operations. If we fail to obtain permits in a timely manner or at all (due to opposition from community or environmental interest
groups, governmental delays, changes in laws or the interpretation thereof or any other reasons), such failure could impede our
operations, which could have a material adverse effect on our results of operations and our financial condition.
We, as the named lessee or as the designated operator under our current and future oil leases and licenses, could be held liable
for all environmental, health and safety costs and liabilities arising out of our actions and omissions as well as those of our third-party
contractors. To the extent we do not address these costs and liabilities or if we are otherwise in breach of our lease or license
requirements, our leases or licenses could be suspended or terminated. We have contracted with and intend to continue to hire third
parties to perform the majority of the drilling and other services related to our operations. There is a risk that we may contract with
third parties with unsatisfactory environmental, health and safety records or that our contractors may be unwilling or unable to cover
any losses associated with their acts and omissions. Accordingly, we could be held liable for all costs and liabilities arising out of the
acts or omissions of our contractors, which could have a material adverse effect on our results of operations and financial condition.
As the designated operator of certain of our leases and licenses, we are required to maintain bonding or insurance coverage for
certain risks relating to our operations, including environmental risks. We maintain insurance at levels that we believe are consistent
with current industry practices, but we are not fully insured against all risks. Our insurance may not cover any or all environmental
claims that might arise from our operations or those of our third-party contractors. If a significant accident or other event occurs and is
not fully covered by our insurance, or our third-party contractors have not agreed to bear responsibility, such accident or event could
have a material adverse effect on our results of operations and our financial condition. In addition, we may not be able to obtain
required bonding or insurance coverage at all or in time to meet our anticipated startup schedule for each well, and if we fail to obtain
this bonding or coverage, such failure could have a material adverse effect on our results of operations and financial condition.
Releases to deepwater of regulated substances are common, and under certain environmental laws, we could be held responsible
for all of the costs relating to any contamination caused by us or our contractors, at our facilities and at any third party waste disposal
sites used by us or on our behalf. These costs could be material. In addition, offshore oil exploration and production involves various
hazards, including human exposure to regulated substances, including naturally occurring radioactive materials. As such, we could be
held liable for any and all consequences arising out of human exposure to such substances or other damage resulting from the release
of regulated substances to the environment, endangered species, property or to natural resources.
Particularly since the Deepwater Horizon event in the U.S. Gulf of Mexico in 2010, there has been an increased interest in
making regulation of deepwater oil and gas exploration and production more stringent in the U.S. If adopted, certain proposals such as
a significant increase or elimination of financial liability caps for economic damages, could significantly raise daily penalties for
infractions and require significantly more comprehensive financial assurance requirements under OPA which could affect our results
of operations and our financial condition.
In addition, we expect continued attention to climate change issues. Various countries and U.S. states and regions have agreed to
regulate emissions of greenhouse gases (“GHGs”), including methane (a primary component of natural gas) and carbon dioxide, a
byproduct of oil and natural gas combustion. Additionally, the U.S. Congress has in the past and may in the future consider legislation
requiring reductions in GHG emissions. The EPA began regulating GHG emissions from certain stationary sources in January 2011
and has enacted GHG emissions standards for certain classes of vehicles. The EPA has adopted rules requiring the reporting of GHG
emissions, including from certain offshore oil and natural gas production facilities on an annual basis. In addition, in accordance with
the Obama Administration’s June 2013 Climate Action Plan (“CAP”), the EPA finalized the Clean Power Plan in August 2015, which
sets forth binding guidelines for GHG emissions from existing power plants, as well as rules relating to GHG emissions from new,
modified and reconstructed power plants. The EPA is also required pursuant to a settlement agreement to issue GHG emissions
