Crescent Energy (CRGY) risk factors, FY2024 10-K

Risks related to the oil and natural gas industry and our operations

1. 01Oil, natural gas and NGL prices are volatile. A sustained decline in prices could adversely affect our business, financial condition and results of operations, liquidity and our ability to meet our financial commitments or cause us to delay our planned capital expenditures
2. 02Historically, the markets for oil, natural gas and NGL have been volatile, and they are likely to continue to be volatile. For
3. 03We have been negatively affected and may in the future be negatively affected by a drop in commodity prices
4. 04Reserve estimates depend on many assumptions that may turn out to be inaccurate. Any material inaccuracies in reserve estimates or underlying assumptions will materially affect the quantities and present value of our reserves
5. 05The present value of future net revenues from our proved reserves, as reflected in our Standardized Measure, PV-0 value and PV-10 value, will not necessarily be the same as the current market value of our estimated proved oil and natural gas reserves
6. 06Unless we replace our reserves with new reserves and develop those reserves, our reserves and production will decline, which may adversely affect our future cash flows and results of operations
7. 07Our development projects require substantial capital expenditures. We may be unable to obtain required capital or financing on satisfactory terms or at all, which could lead to a decline in our reserves and cash flows
8. 08The development of our estimated PUD reserves may take longer and may require higher levels of capital expenditures than we currently anticipate. Therefore, our estimated PUD reserves may not be ultimately developed or produced
9. 09Our development opportunities are scheduled to be developed over many years, making them susceptible to uncertainties that could materially alter the occurrence or timing of such development. In addition, we may not be able to raise the substantial amount of capital that would be necessary to drill such locations
10. 10Drilling for and producing oil and natural gas are high-risk activities with many uncertainties that could adversely affect our business, financial condition or results of operations
11. 11We may experience difficulty in achieving and managing future growth
12. 12Our operations are dependent on third-party service providers
13. 13Inflationary issues and associated changes in monetary policy previously have resulted in and such issues, as well as certain proposed tariffs, may in the future result in additional increases to the cost of our goods, services and personnel, which in turn cause our capital expenditures and operating costs to rise
14. 14Properties we have recently acquired or may acquire in the future may not produce as projected, and we may be unable to determine reserve potential, identify liabilities associated with such properties or obtain protection from sellers against such liabilities
15. 15Future commodity price declines may result in write-downs of our asset carrying values
16. 16Our business is subject to operational risks that will not be fully insured. If any of the operational risks materialize our financial condition or results of operations could be materially and adversely affected
17. 17We may be unable to compete effectively with larger companies, which may adversely affect our ability to generate sufficient revenues
18. 18Deficiencies of title to our leased interests could materially and adversely affect our financial condition
19. 19Certain of our properties are subject to land use restrictions, which could limit the manner in which we conduct our business
20. 20Part of our business strategy will involve using some of the latest available horizontal D&C techniques, which involve risks and uncertainties in their application
21. 21We may encounter obstacles to marketing our oil and natural gas, which could materially and adversely affect our revenues
22. 22for certain financial obligations of the operators or any of our contractors to the extent such operator or contractor is unable to satisfy such obligations

Risks related to regulatory matters

1. 23The Inflation Reduction Act of 2022 imposed new costs on our operations and might contribute to an acceleration in the transition to a low carbon economy
2. 24Our operations are substantially dependent on the availability of water. Restrictions on our ability to obtain water may have a material and adverse effect on our financial condition, results of operations and cash flows
3. 25We may face unanticipated water and other waste disposal costs
4. 26A change in the jurisdictional characterization of some of our assets by federal, state or local regulatory agencies or a change in policy by those agencies may result in increased regulation of our assets, which may cause our revenues to decline and operating expenses to increase
5. 27Should we fail to comply with all applicable FERC administered statutes, rules, regulations and orders, we could be subject to substantial penalties and fines
6. 28Our sales of oil and natural gas, and any hedging activities related to such energy commodities, expose us to potential regulatory risks
7. 29The adoption of derivatives legislation and regulations by the U.S. Congress related to derivative contracts could have a material and adverse effect on our ability to hedge risks associated with our business
8. 30for other types of swap transactions. Dodd-Frank also imposes recordkeeping and reporting obligations on counterparties to swap transactions and other regulatory compliance obligations
9. 31Our ability to pursue our business strategies may be adversely affected if we incur costs and liabilities due to a failure to comply with environmental laws or regulations or a release of hazardous substances or other wastes into the environment
10. 32We are subject to complex federal, state, local and other laws and regulations that could materially and adversely affect the cost, manner or feasibility of conducting our operations
11. 33Our operations are subject to a series of risks arising from climate change
12. 34alongside increased regulation by California seeking to reduce both the supply and demand for fossil fuels in the state, to
13. 35Federal, state and local legislative and regulatory initiatives relating to hydraulic fracturing as well as governmental reviews of such activities could result in increased costs and additional operating restrictions or delays in the completion of oil and natural gas wells and adversely affect our production
14. 36Restrictions on drilling activities intended to protect certain species of wildlife may adversely affect our ability to conduct drilling activities in some of the areas where we operate
15. 37Increased attention to sustainability-related matters and conservation measures may adversely impact our business

Risks related to our indebtedness

1. 38We are partially dependent on our Revolving Credit Facility and continued access to capital markets to successfully execute our operating strategies
2. 39We have incurred significant additional indebtedness during recent periods, which may impair our ability to raise further capital or impact our ability to service our debt
3. 40A reduction in the borrowing base under our Revolving Credit Facility as a result of periodic borrowing base redeterminations or otherwise may negatively impact our ability to fund our operations
4. 41If we experience liquidity concerns, we could face a downgrade in our debt ratings which could restrict our access to, and negatively impact the terms of, current or future financings or trade credit
5. 42The borrowings under our Revolving Credit Facility expose us to interest rate risk

Risks related to our common stock

1. 43If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results or prevent fraud. As a result, stockholders could lose confidence in our financial reporting, which would harm our business and the trading price of our Class A Common Stock
2. 44An active, liquid and orderly trading market for our Class A Common Stock may not be maintained
3. 45Future sales of our Class A Common Stock in the public market, or the perception that such sales may occur, could reduce the price of our Class A Common Stock, and any additional capital raised by us through the sale of equity or convertible securities may dilute your ownership in us
4. 46If securities or industry analysts do not continue to publish research or reports about our business, if they adversely change their recommendations regarding our Class A Common Stock or if our operating results do not meet their expectations, the trading price of our Class A Common Stock could decline

Risks related to our financial condition

1. 47Our hedging activities could result in financial losses or could reduce our net income
2. 48We enter into derivative instrument contracts for a significant portion of our existing production. We plan to continue the practice of entering into hedging arrangements to reduce near-term exposure to commodity prices, protect cash flow and returns and maintain our liquidity
3. 49Our hedging transactions could expose us to counterparty credit risk
4. 50Certain employees of our operating subsidiaries have profits interests that may require substantial payouts and result in substantial accounting charges
5. 51Our only principal asset is our interest in OpCo; accordingly, which in turn holds interests in our operating subsidiaries; we depend on distributions and other payments from OpCo and our operating subsidiaries, the amount of which will depend on various factors

Risks related to our governance structure

1. 52We are a “controlled company” within the meaning of NYSE rules and, as a result, qualify for and rely on exemptions from certain corporate governance requirements
2. 53Our Preferred Stockholder’s significant voting power limits the ability of holders of our common stock to influence our business
3. 54Our Certificate of Incorporation provides that the Preferred Stockholder is, to the fullest extent permitted by law, under no obligation to consider the separate interests of the other stockholders and will contain provisions limiting the liability of the Preferred Stockholder
4. 55Our Certificate of Incorporation contains a provision renouncing our interest and expectancy in certain corporate opportunities that may prevent us from receiving the benefit of certain corporate opportunities

Tax risks

1. 56If OpCo were to become a publicly traded partnership taxable as a corporation for U.S. federal income tax purposes, we and OpCo might be subject to potentially significant tax inefficiencies
2. 57Changes to applicable tax laws and regulations or exposure to additional tax liabilities could adversely affect our business, results of operations, financial condition and cash flows

General risks

1. 58Loss, failure or disruption of our and our operators’ information and computer systems could adversely affect our business
2. 59A terrorist attack or armed conflict or associated economic sanctions resulting therefrom could harm our business
3. 60Our business could be negatively affected by security threats, including cyber security threats, and other disruptions and is subject to complex and evolving laws and regulations regarding privacy and data protection
4. 61From time to time, we may be involved in legal proceedings that could result in substantial liabilities
5. 62We may be unable to dispose of non-strategic assets on attractive terms and may be required to retain liabilities for certain matters
6. 63Our operations are subject to catastrophic losses, operational hazards and unforeseen interruptions and other disruptive risks for which we may not be adequately insured