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standards for oil refineries, but no such standards have been proposed to date. The CAP also calls upon EPA and other governmental
agencies to identify ways in which to reduce methane emissions from various sectors, including the oil and gas industry. In addition,
in August 2015 the EPA proposed new regulations to reduce methane emissions from oil and gas operations in an effort to reduce
methane emissions from the oil and gas sector by up to forty-five percent by 2025. The EPA is also expected to expand the GHG
Reporting Rule to cover all segments of the oil and gas industry. Additionally, the EPA and the National Highway Traffic Safety
Administration administer GHG emissions standards for heavy, medium and light duty vehicles, which have become increasingly
stringent over time. The regulation of GHGs and the physical impacts of climate change in the areas in which we, our customers and
the end-users of our products operate could adversely impact our operations and the demand for our products.
Environmental, health and safety laws are complex, change frequently and have tended to become increasingly stringent over
time. Our costs of complying with current and future environmental, health and safety laws, and our liabilities arising from releases of,
or exposure to, regulated substances may adversely affect our results of operations and our financial condition. See “Business—
Environmental Matters and Regulation.”
Non-U.S. holders of our common stock, in certain situations, could be subject to U.S. federal income tax upon the sale, exchange
or other disposition of our common stock.
Our assets consist primarily of interests in U.S. oil and gas properties (which constitute U.S. real property interests for purposes
of determining whether we are a U.S. real property holding corporation) and interests in non-U.S. oil and gas properties, the relative
values of which at any time may be uncertain and may fluctuate significantly over time. Therefore, we may be, now or at any time
while a non-U.S. investor owns our common stock, a U.S. real property holding corporation. As a result, under the Foreign Investment
in Real Property Tax Act (“FIRPTA”), certain non-U.S. investors may be subject to U.S. federal income tax on gain from the
disposition of shares of our common stock, in which case they would also be required to file U.S. tax returns with respect to such gain.
Whether these FIRPTA provisions apply depends on the amount of our common stock that such non-U.S. investors hold and whether,
at the time they dispose of their shares, our common stock is regularly traded on an established securities market (such as the New
York Stock Exchange (“NYSE”)) within the meaning of the applicable Treasury Regulations. So long as our common stock is listed
on the NYSE, only a non-U.S. investor who has held, actually or constructively, more than 5% of our common stock may be subject to
U.S. federal income tax on the disposition of our common stock under FIRPTA.
We may incur substantial losses and become subject to liability claims for which we may not have adequate insurance coverage.
Several external factors could arise which would significantly impact our ability to effectively insure our oil and natural gas
exploration and development operations. Should legislation be passed to increase the minimum insurance limit of the OSFR policy
required for future U.S. Gulf of Mexico oil and natural gas exploration, there is no assurance that we will be able to obtain this
insurance. The insurance markets may not provide products to financially insure us against all operational risks. For instance, civil and
criminal penalties for environmental pollution can be very severe and may not be insurable. For some risks, we may not obtain
insurance if we believe the market price of available insurance is excessive or prohibitive relative to the risks presented. For instance,
we do not purchase business interruption or wind insurance due to the market pricing.
Even when insurance is purchased, exclusions in coverage, unanticipated circumstances and potentially large indemnity
obligations may have a material adverse effect on our operations and financial condition.
The continuation of the recent severe
declines in oil and gas prices has had a negative impact on the foreign currency exchange market for the Angola Kwanza, which in
turn has made it more difficult for our insurance provider in Angola to obtain foreign currency in an amount sufficient to procure
adequate re-insurance. The inability of our insurance provider to obtain adequate re-insurance may jeopardize our insurance coverage
or otherwise impair its ability to perform its obligations under our insurance policies and agreements.
Because third-party contractors
and other service providers are used in our offshore operations, we may not realize the intended protections of worker’s compensation
laws in dealing with their employees. Generally, under our contracts with drilling and other oilfield service contractors, we are
obligated, subject to certain exceptions and limitations, to indemnify such contractors for all claims arising out of damage to our
property, injury or death to our employees and pollution emanating from the well-bore, including pollution resulting from blow-outs
and uncontrolled flows of hydrocarbons.
In addition, even when insurance is purchased, we may encounter disputes with our insurance providers concerning coverage
and such providers may attempt to deny coverage. For example, certain of our insurance providers are disputing coverage for certain
expenses and potential liabilities, including with respect to our current shareholder litigation matters. We are enforcing our rights to
coverage pursuant to our insurance agreements with these insurance providers and believe such expenses and potential liabilities are
covered by such insurance, within certain thresholds. Should we be unsuccessful in enforcing rights under our insurance agreements,
should we breach the terms of our insurance agreements or should such insurance agreements not provide the coverage we believed to
be in place, any losses we incur which are not covered wholly or partially by insurance could have a material adverse effect on our
results of operations and financial condition.
