Infinity Natural Resources (INR) risk factors, FY2024 10-K

Risks Related to Commodity Prices

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. 02We could experience periods of higher costs if commodity prices rise. These increases could reduce our profitability, cash flow and ability to complete development activities as planned
3. 03Certain factors could require us to write down the carrying values of our properties, including commodity prices decreasing to a level such that our future undiscounted cash flows from our properties are less than their carrying value

Risks Related to Our Reserves, Leases and Drilling Locations

1. 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
2. 05Unless we replace our reserves with new reserves and develop those new reserves, our reserves and production will decline, which would adversely affect our future cash flows and results of operations
3. 06The development of our estimated PDNPs and PUDs may take longer and may require higher levels of capital expenditures than we currently anticipate. Therefore, our estimated PDNPs and PUDs may not be ultimately developed or produced
4. 07Our identified drilling locations are scheduled out over many years, making them susceptible to uncertainties that could materially alter the occurrence or timing of their drilling
5. 08Properties that we decide to drill may not yield oil, natural gas and NGLs in commercially viable quantities
6. 09Seismic data is subject to interpretation and may not accurately identify the presence of drilling hazards, which could adversely affect the results of our drilling operations

Risks Related to Our Operations

1. 10Our development projects and acquisitions require substantial capital expenditures. We may be unable to obtain any required capital or financing on satisfactory terms, which could lead to a decline in our production and reserves
2. 11our ability to access the capital markets or sell non-core assets
3. 12Drilling for and producing oil, natural gas and NGLs are high-risk activities with many uncertainties that could adversely affect our business, financial condition or results of operations
4. 13Some of our properties are in areas that may have been partially depleted or drained by offset (i.e., neighboring) wells, and certain of our wells may be adversely affected by actions other operators may take when drilling, completing or operating wells that they own
5. 14Part of our business strategy involves using some of the latest available horizontal drilling and completion techniques, which involve risks and uncertainties in their application
6. 15being able to run and remove tools and other equipment consistently through the entire length of the wellbore
7. 16the ability to successfully clean out the wellbore after completion of the final fracture stimulation stage
8. 17Our producing properties are concentrated in the Appalachian Basin, making us vulnerable to risks associated with operating in one major geographic area
9. 18The unavailability or high cost of drilling rigs, completion crews, equipment, supplies, personnel and oilfield services could adversely affect our ability to execute our development plans within our budget and on a timely basis
10. 19The loss of one or more of the purchasers of our production could adversely affect our business, results of operations, financial condition and cash flows
11. 20We may incur losses as a result of title defects in the properties in which we invest
12. 21We may be unable to make attractive acquisitions or successfully integrate acquired businesses, and any inability to do so may disrupt our business and hinder our ability to grow
13. 22Changes in effective tax rates, or adverse outcomes resulting from other tax increases or an examination of our income or other tax returns, could adversely affect our results of operations and financial condition
14. 23changes in tax laws, tax regulations, accounting principles, or interpretations or applications thereof
15. 24Continuing or worsening inflationary pressures and associated changes in monetary policy may result in increases to the cost of our goods, services, and personnel, which in turn could cause our capital expenditures and operating costs to rise
16. 25We are not the operator of all of our oil and natural gas properties and therefore are not in a position to control the timing of development efforts, the associated costs or the rate of production of the reserves on such properties
17. 26Properties we acquire may not produce as projected, and we may be unable to determine reserve potential, identify liabilities associated with the properties that we acquire or obtain protection from sellers against such liabilities
18. 27Strategic determinations, including the allocation of capital and other resources to strategic opportunities, are subject to risk and uncertainties, and our failure to appropriately allocate capital and resources among our strategic opportunities may adversely affect our financial condition
19. 28We maintain insurance against some, but not all, operating risks and losses. Losses and liabilities arising from uninsured and underinsured events could materially and adversely affect our business, financial condition or results of operations
20. 29terrorist attacks targeting natural gas and oil related facilities and infrastructure
21. 30repair and remediation costs
22. 31Competition in our industry is intense, making it more difficult for us to acquire properties, market oil, natural gas and NGLs, secure trained personnel and raise additional capital
23. 32The loss of senior management or technical personnel could adversely affect operations
24. 33Loss of our information and computer systems could adversely affect our business
25. 34Cyberattacks targeting systems and infrastructure used by the oil and gas industry and related regulations may adversely impact our operations and, if we are unable to obtain and maintain adequate protection for our data, our business may be harmed
26. 35Terrorist activities could materially adversely affect our business and results of operations
27. 36A deterioration in general economic, business or industry conditions would have a material adverse effect on our results of operations, liquidity, financial condition, results of operations, cash flows and ability to pay dividends on our Class A common stock
28. 37We previously identified material weaknesses in our internal control over financial reporting and may identify additional material weaknesses in the future which, if not corrected, could affect the reliability of our consolidated financial statements and have other adverse consequences

Risks Related to Our Derivative Transactions, Debt and Access to Capital

1. 38Our derivative activities could result in financial losses or could reduce our earnings
2. 39there are issues with regard to legal enforceability of such instruments
3. 40The failure of our hedge counterparties, significant customers or working interest holders to meet their obligations to us may adversely affect our financial results
4. 41Our ability to obtain financing on terms acceptable to us may be limited in the future by, among other things, increases in interest rates
5. 42The borrowing base under our Credit Facility may be reduced if commodity prices decline, which could hinder or prevent us from meeting our future capital needs
6. 43The enactment of derivatives legislation could have an adverse effect on our ability to use derivative instruments to reduce the effect of commodity price, interest rate and other risks associated with our business

Risks Related to our Class A Common Stock and Capital Structure

1. 44We are a holding company. Our sole material asset is our equity interest in INR Holdings and we are accordingly dependent upon distributions from INR Holdings to pay taxes, make payments under the Tax Receivable Agreement and cover our corporate and other overhead expenses
2. 45As of March 21, 2025, Pearl owns INR Units and corresponding Class B common stock representing approximately 47.5% of our voting power and NGP owns INR Units and corresponding Class B common stock representing approximately 15.8% of our voting power (together representing 63.3% of our combined voting power)
3. 46Conflicts of interest could arise in the future between us and Pearl, NGP and their respective affiliates, including their portfolio companies concerning conflicts over our operations or business opportunities
4. 47An active, liquid trading market for our Class A common stock may not be maintained
5. 48Certain of our directors have significant duties with, and spend significant time serving, entities that may compete with us in seeking acquisitions and business opportunities and, accordingly, may have conflicts of interest in allocating time or pursuing business opportunities
6. 49Our amended and restated certificate of incorporation (“Charter”) and amended and restated bylaws (“Bylaws”), as well as Delaware law, contain provisions that could discourage acquisition bids or merger proposals, which may adversely affect the market price of our Class A common stock
7. 50establishing advance notice and certain information requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at stockholder meetings
8. 51We cannot assure you that we will be able to pay dividends on our Class A common stock
9. 52Future sales of our Class A common stock in the public market could reduce our stock price, and any additional capital raised by us through the sale of equity or convertible securities may dilute ownership in us
10. 53Certain of the Legacy Owners are party to a registration rights agreement with us that requires us to effect the registration of their shares in certain circumstances no earlier than the expiration of the lock-up period
11. 54We limit the liability of, and indemnify, our directors and officers
12. 55law. As a result, our stockholders may have fewer rights against our non-employee directors and officers than they would have absent such provisions in our Charter and indemnification agreements, and a stockholder’s ability to seek and recover damages for a breach of fiduciary duties may be reduced or restricted
13. 56involve and retain to a greater degree outside counsel and accountants in the above activities
14. 57For as long as we are an emerging growth company, we will not be required to comply with certain reporting requirements, including disclosure about our executive compensation, that apply to other public companies
15. 58Because we have elected to take advantage of the extended transition period pursuant to Section 107 of the JOBS Act, our financial statements may not be comparable to those of other public companies
16. 59We may issue preferred stock whose terms could adversely affect the voting power or value of our Class A common stock
17. 60Terms of subsequent financings may adversely impact stockholder equity
18. 61If securities or industry analysts do not publish research or reports or publish unfavorable research 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, our stock price could decline
19. 62We will be required to make payments under the Tax Receivable Agreement for certain tax benefits we may claim, and the amounts of such payments could be significant
20. 63In certain cases, payments under the Tax Receivable Agreement may be accelerated and/or significantly exceed the actual benefits we realize, if any, in respect of the tax attributes subject to the Tax Receivable Agreement
21. 64In the event that our payment obligations under the Tax Receivable Agreement are accelerated upon certain mergers, other forms of business combinations or other changes of control, the consideration payable to holders of our Class A common stock could be substantially reduced
22. 65We will not be reimbursed for any payments made under the Tax Receivable Agreement in the event that any tax benefits are subsequently disallowed
23. 66In certain circumstances, INR Holdings will be required to make tax distributions to us and the INR Unit Holders, and the tax distributions that INR Holdings will be required to make may be substantial
24. 67The Legacy Owners’ interests may not be fully aligned with the interests of the holders of our Class A common stock

Risks Related to Environmental and Regulatory Matters

1. 68Our operations are subject to stringent environmental, health and safety laws and regulations that may expose us to significant costs and liabilities that could exceed current expectations
2. 69We may be involved in legal and regulatory proceedings that could result in substantial liabilities
3. 70Climate change legislation or regulations restricting emissions of GHGs could result in increased operating costs and adversely affect our business
4. 71Prolonged negative investor sentiment toward upstream oil and natural gas focused companies could limit our access to capital funding, damage our reputation and adversely impact our business, financial condition and results of operations
5. 72Restrictions on drilling activities intended to protect certain species of wildlife may adversely affect our ability to conduct drilling activities in areas where we operate
6. 73We are subject to risks related to climate change, which could have a material adverse effect on our business, financial condition and results of operations
7. 74Increasing attention to Environmental, Social and Governance (“ESG”) and sustainability matters may expose us to additional risk, which could have an adverse effect on our business, financial condition and results of operations and damage our reputation
8. 75Should we fail to comply with all applicable FERC administered statutes, rules, regulations and orders, we could be subject to substantial penalties and fines