TXO Partners (TXO) risk factors, FY2025 10-K

Risks Related to Cash Distributions

1. 01We may not have sufficient available cash to pay any quarterly distribution on our common units following the establishment of cash reserves and payment of expenses35% rewritten
2. 02the level of our interest expenses, which will depend on the amount of our outstanding indebtedness and the applicable interest rateNew
3. 03The amount of our quarterly cash distributions from our available cash, if any, may vary significantly both quarterly and annually and will be directly dependent on the performance of our business. We do not have a minimum quarterly distribution and could pay no distribution with respect to any particular quarter

Risks Related to Our Business and the Oil, Natural Gas and NGL Industry

1. 04The volatility of oil, natural gas and NGL prices due to factors beyond our control greatly affects our financial condition, results of operations and cash available for distribution48% rewritten
2. 05overall domestic and global economic conditionsNew
3. 06Unless we replace the reserves we produce, our revenues and production will decline, which would adversely affect our cash flow from operations and our ability to make distributions to our unitholders
4. 07Currently, our producing properties are concentrated in the Permian, San Juan and Williston Basins, making us vulnerable to risks associated with operating in a limited number of geographic areas
5. 08Drilling for and producing oil, natural gas and NGLs are high-risk activities with many uncertainties that could adversely affect our business, financial condition, results of operations and cash distributions to unitholders
6. 09We may be unable to make accretive acquisitions or successfully integrate acquired businesses or assets, and any inability to do so may disrupt our business and hinder our growth potential
7. 10Properties 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
8. 11Increased costs of capital could adversely affect our business31% rewritten
9. 12We incurred significant indebtedness to finance the Williston Basin TransactionsNew
10. 13Drilling locations that we decide to drill may not yield oil, natural gas or NGLs in commercially viable quantities
11. 14We may incur losses as a result of title defects in the properties in which we invest
12. 15We operate certain of our properties through a joint venture over which we have shared control39% rewritten
13. 16We own non-operating interests in properties developed and operated by third parties and some of our leasehold acreage could be pooled by a third-party operator. As a result, we are unable, or may become unable as a result of pooling, to control the operation and profitability of such properties
14. 17Extreme weather conditions and other climatic phenomena could adversely affect our ability to conduct drilling activities in the areas where we operate
15. 18Declining general economic, business or industry conditions and inflation may have a material adverse effect on our results of operations, liquidity and financial condition
16. 19Changes in U.S. trade policy, including the imposition of increased or additional tariffs and the resulting consequences, could have a material adverse effect on our results of operations, financial position and cash flows
17. 20Events outside of our control, including an epidemic or outbreak of an infectious disease, or the threat thereof, could have a material adverse effect on our business, liquidity, financial condition, results of operations, cash flows and ability to pay distributions on our common units
18. 21infections and quarantining of our employees and the personnel of vendors, suppliers and other third partiesNew
19. 22We opportunistically use derivative instruments to economically hedge exposure to changes in commodity price and, as a result, are exposed to credit risk and market risk34% rewritten
20. 23Reserve estimates depend on many assumptions that may ultimately be inaccurate. Any material inaccuracies in reserve estimates or underlying assumptions will materially affect the quantities and present value of our reserves24% rewritten
21. 24The standardized measure of our estimated proved reserves is not necessarily the same as the current market value of our estimated proved reserves
22. 25We depend upon several significant purchasers for the sale of most of our oil, natural gas and NGL production. The loss of one or more of these purchasers could, among other factors, limit our access to suitable markets for the oil and natural gas we produce
23. 26We may be unable to compete effectively with larger companies, which may adversely affect our ability to generate sufficient revenue to allow us to pay distributions to our unitholders
24. 27Our Credit Facility has restrictions and financial covenants that may restrict our business and financing activities and our ability to pay distributions to our unitholders85% rewritten
25. 28transfer, sell or otherwise dispose of assetsNew
26. 29Any significant reduction in the borrowing base under our Credit Facility as a result of periodic borrowing base redeterminations or otherwise may negatively impact our ability to fund our operations
27. 30We may not be able to generate sufficient cash to service all of our indebtedness and may be forced to take other actions to satisfy our obligations under our debt arrangements, which may not be successful
28. 31Our level of indebtedness may increase and reduce our financial flexibility70% rewritten
29. 32a high level of debt may impair our ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions, or other general corporate purposesNew
30. 33We could experience periods of higher costs if commodity prices rise. These increases could reduce our profitability, cash flows and ability to complete development activities as planned
31. 34We are highly dependent on the services of our senior management and the loss of senior management or technical personnel could adversely affect our operations
32. 35Past performance by our management team may not be indicative of future performance of an investment in us
33. 36We are responsible for the decommissioning, abandonment, and reclamation costs for our facilities, which could decrease our cash available for distribution
34. 37Asset retirement obligations for our oil and gas assets and properties are estimates, and actual costs could vary significantly
35. 38Our business could be negatively affected by security threats, including cybersecurity threats, and other disruptions49% rewritten
36. 39We are subject to a number of privacy and data protection laws, rules and directives (collectively, data protection laws) relating to the processing of Personal Information62% rewritten
37. 40Loss of our information and computer systems could adversely affect our business
38. 41Our acquisition, development, optimization and exploitation projects require substantial capital expenditures. We may be unable to obtain required capital or financing on satisfactory terms, which could lead to a decline in our ability to access or grow production and reserves72% rewritten
39. 42our ability to borrow under our Credit FacilityNew
40. 43Continuing political and social concerns about the issues of climate change may result in changes to our business and significant expenditures, including litigation-related expenses

Risks Related to Environmental and Regulatory Matters

1. 44We are subject to stringent federal, state and local laws and regulations related to environmental and occupational health and safety issues that could adversely affect the cost or feasibility of conducting our operations or expose us to significant liabilities
2. 45Should we fail to comply with all applicable regulatory agency administered statutes, rules, regulations and orders, we could be subject to substantial penalties and fines
3. 46Our operations are subject to a series of risks arising out of the threat of climate change that could result in increased operating costs, limit the areas in which we may conduct oil, natural gas and NGL exploration and production activities, and reduce demand for the oil, natural gas and NGLs we produce
4. 47Scrutiny related to ESG matters and conservation measures may adversely impact our business79% rewritten
5. 48We may face various risks associated with the long-term trend toward increased activism against oil and gas exploration and development activities27% rewritten
6. 49other adverse effects on our ability to develop our properties and expand productionNew
7. 50Prolonged negative investor sentiment toward upstream natural gas and oil focused companies could limit our access to capital funding, which would constrain liquidity
8. 51Conservation measures and technological advances could reduce demand for oil, natural gas and NGLs
9. 52Federal, 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 unconventional natural gas wells and adversely affect our production
10. 53Restrictions on drilling activities intended to protect certain species of wildlife may adversely affect our ability to conduct drilling activities in areas where we operate
11. 54The third parties on whom we rely for transportation services are subject to complex federal, state, tribal and local laws that could adversely affect the cost, manner or feasibility of conducting our business
12. 55Derivatives regulation could have an adverse effect on our ability to use derivative contracts to reduce the effect of commodity price, interest rate and other risks associated with our business
13. 56We may be involved in legal proceedings that could result in substantial liabilities
14. 57We are not insured against all risks. Losses and liabilities arising from uninsured and under insured events could materially and adversely affect our business, financial condition or results of operations67% rewritten
15. 58terrorist attacks targeting oil and natural gas related facilities and infrastructureNew
16. 59repair and remediation costsNew
17. 60Limitation or restrictions on our ability to obtain or dispose of water may have an adverse effect on our operating results
18. 61Our general partner and its affiliates own a controlling interest in us and will have conflicts of interest with, and owe limited duties to, us, which may permit them to favor their own interests to the detriment of us and our unitholders51% rewritten
19. 62Our general partner decides whether to retain separate counsel, accountants or others to perform services for usNew
20. 63Our partnership agreement requires that we distribute all of our available cash, which could limit our ability to grow our reserves and production and make acquisitions44% rewritten
21. 64prices for oil, natural gas and NGLsNew
22. 65Our partnership agreement replaces our general partner’s fiduciary duties to us and our unitholders with contractual standards governing its duties, and restricts the remedies available to unitholders for actions taken by our general partner that might otherwise constitute breaches of fiduciary duty55% rewritten
23. 66whether or not to consent to any merger or consolidation of the partnership or amendment to the partnership agreementNew
24. 67determined by the Board to be fair and reasonable to us, taking into account the totality of the relationships among the parties involved, including other transactions that may be particularly favorable or advantageous to usNew
25. 68Increases in interest rates could adversely impact our unit price and our ability to issue additional equity and incur debt
26. 69Our general partner may amend our partnership agreement, as it determines necessary or advisable, to permit the general partner to redeem the units of certain non-citizen unitholders
27. 70Our unitholders have limited voting rights and are not entitled to elect our general partner or the Board, which could reduce the price at which our common units will trade
28. 71Even if our unitholders are dissatisfied, they are limited in their ability to remove our general partner without its consent
29. 72Control of our general partner may be transferred to a third party without unitholder consent
30. 73We may issue an unlimited number of additional units, including units that are senior to the common units, without unitholder approval
31. 74Our partnership agreement restricts the voting rights of unitholders owning 20% or more of our common units
32. 75Affiliates of our general partner may sell common units in the public markets, which sales could have an adverse impact on the trading price of the common units
33. 76Our general partner has a limited call right that may require you to sell your common units at an undesirable time or price
34. 77The NYSE does not require a publicly traded partnership like us to comply, and we do not intend to comply, with certain of its governance requirements generally applicable to corporations
35. 78Our unitholders’ liability may not be limited if a court finds that unitholder action constitutes control of our business
36. 79Our unitholders may have liability to repay distributions that were wrongfully distributed to them
37. 80If our common unit price declines, our unitholders could lose a significant part of their investment30% rewritten
38. 81changes in general conditions in the U.S. economy, financial markets or the oil and natural gas industryNew
39. 82For as long as we are an emerging growth company, we will not be required to comply with certain reporting requirements that apply to other public companies, including those relating to auditing standards and disclosure about our executive compensation
40. 83Taking advantage of the longer phase-in periods for the adoption of new or revised financial accounting standards applicable to emerging growth companies may make our common units less attractive to investors
41. 84If we fail to develop or maintain an effective system of internal controls, we may not be able to accurately report our financial results or prevent fraud. As a result, current and potential unitholders could lose confidence in our financial reporting, which would harm our business and the trading price of our units
42. 85Our general partner may elect to convert or restructure us from a partnership to an entity taxable as a corporation for U.S. federal income tax purposes without unitholder consent
43. 86We incur increased costs as a result of being a publicly traded partnership
44. 87If securities or industry analysts do not publish research or reports about our business, if they adversely change their recommendations regarding our units or if our operating results do not meet their expectations, our unit price could decline
45. 88Tax Risks to Common Unitholders90% rewritten
46. 89corporation for federal income tax purposes or if we were otherwise subject to a material amount of entity-level taxation, then cash available for distribution to our unitholders could be reducedNew
47. 90The tax treatment of publicly traded partnerships or an investment in our common units could be subject to potential legislative, judicial or administrative changes and differing interpretations, possibly on a retroactive basis77% rewritten
48. 91Certain U.S. federal income tax incentives currently available with respect to oil and natural gas exploration and production may be reduced or eliminated as a result of future legislation
49. 92We will prorate our items of income, gain, loss and deduction between transferors and transferees of our common units each month based upon the ownership of our common units on the first day of each month, instead of on the basis of the date a particular common unit is transferred
50. 93A successful IRS contest of the federal income tax positions we take may adversely impact the market for our common units and the cost of any IRS contest will reduce our cash available for distribution to unitholders34% rewritten
51. 94Our unitholders may be required to pay taxes on their share of our income even if they do not receive any cash distributions from us
52. 95Tax gains or losses on the disposition of our common units could be more or less than expected
53. 96Unitholders may be subject to limitation on their ability to deduct interest expense incurred by us
54. 97Tax-exempt entities face unique tax issues from owning our common units that may result in adverse tax consequences to them
55. 98We will treat each purchaser of our common units as having the same tax benefits without regard to the common units purchased. The IRS may challenge this treatment, which could adversely affect the value of our common units
56. 99Our common unitholders will likely be subject to state and local taxes and return filing requirements in states where they do not live as a result of an investment in our common units
57. 100We will adopt certain valuation methodologies in determining a unitholder’s allocations of income, gain, loss and deduction. The IRS may challenge these methods or the resulting allocations and such a challenge could adversely affect the value of our common units