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purposes, the notes would be accounted for as if the number of shares of common stock that would be necessary to settle such excess,
if we elected to settle such excess in shares, are issued.
However, we cannot be sure that the accounting standards in the future will continue to permit the use of the treasury stock
method. If we are unable to use the treasury stock method in accounting for the shares issuable upon conversion of the notes, for
whatever reason, then we would have to apply the if-converted method, the effect of which is that conversion will not be assumed for
purposes of computing diluted earnings per share if the effect would be antidilutive. Under the if-converted method, for diluted
earnings per share purposes, convertible debt is antidilutive whenever its interest, net of tax and nondiscretionary adjustments, per
common share obtainable on conversion exceeds basic earnings per share. Dilutive securities that are issued during a period and
dilutive convertible securities for which conversion options lapse, or for which related debt is extinguished during a period, will be
included in the denominator of diluted earnings per share for the period that they were outstanding. Likewise, dilutive convertible
securities converted during a period will be included in the denominator for the period prior to actual conversion. Moreover, interest
charges applicable to the convertible debt will be added back to the numerator.
The borrowing base under our Heidelberg reserve-based loan facility will likely be substantially reduced in the near future, which
could negatively impact our funding for future development drilling at Heidelberg.
The borrowing base under our Heidelberg reserve-based loan facility will likely be substantially reduced in the near future
depending upon the level of oil and gas prices and the performance of the producing wells and production facilities associated with the
Heidelberg field. The Heidelberg field started producing oil and gas in January 2016 and the performance of its producing wells is
uncertain. The amount available for borrowing at any one time under the Heidelberg reserve-based loan facility is limited to a
borrowing base amount determined twice a year using agreed projections by applying the lower of (i) a project life coverage ratio of
1.5:1.0 to the sum of discounted projected net revenues from the Heidelberg field and certain capital expenditures and (ii) a loan life
coverage ratio of 1.3:1.0 to the sum of discounted projected net revenues from the Heidelberg field and certain capital expenditures.
Interim borrowing base redeterminations can take place between scheduled redetermination dates in limited circumstances specified in
the facility agreement.
Our next redetermination will occur in March 2016 and our borrowing base will likely be substantially reduced. In the event the
amount outstanding under our Heidelberg reserve-based loan facility at any time exceeds the borrowing base at such time, we may be
required to repay a portion of our outstanding borrowings. Currently, we have not borrowed any amounts under our Heidelberg
reserve-based loan facility. If the borrowing base under our Heidelberg reserve-based loan facility is reduced, this could have an
adverse effect on our liquidity and financial condition and could negatively impact funding for future development drilling at
Heidelberg.
Risks Relating to our Common Stock
Our stock price may be volatile, and investors in our common stock could incur substantial losses.
Our stock price may be volatile. The stock market in general has experienced extreme volatility that has often been unrelated to
the operating performance of particular companies. The market price for our common stock may be influenced by many factors,
including, but not limited to:
•
the timing or occurrence of the closing of the sale of our interests in Block 20 and 21 offshore Angola;
•
the price of oil and natural gas;
•
the success of our development and production operations, and the marketing of any oil and gas we produce;
•
to what extent our exploration wells are successful;
•
regulatory developments in the United States and foreign countries where we operate;
•
the recruitment or departure of key personnel;
•
quarterly or annual variations in our financial results or those of companies that are perceived to be similar to us;
•
market conditions in the industries in which we compete and issuance of new or changed securities;
