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What changed in CIVITAS RESOURCES, INC.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of CIVITAS RESOURCES, INC.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+440 added−445 removedSource: 10-K (2025-02-24) vs 10-K (2024-02-27)

Top changes in CIVITAS RESOURCES, INC.'s 2024 10-K

440 paragraphs added · 445 removed · 267 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

76 edited+101 added−14 removed126 unchanged
Biggest changeThere is an inherent risk of incurring significant environmental costs and liabilities in our operations, some of which may be material, due to our handling of petroleum hydrocarbons and wastes, our emissions into air, water, and the environment, the underground injection or other disposal of our wastes, the use and disposition of hydraulic fracturing fluids, and historical industry operations and waste disposal practices.
Biggest changeFailure to comply with these laws and regulations may result in the assessment of administrative, civil, and criminal penalties; the imposition of investigatory or remedial obligations; the issuance of injunctions limiting or preventing some or all of our operations; delays in granting permits; or even the cancellation of leases and/or permits. 50 There is an inherent risk of incurring significant environmental costs and liabilities in our operations, some of which may be material, due to our handling of petroleum hydrocarbons and wastes, our emissions into air, water, and the environment, the underground injection or other disposal of our wastes, the use and disposition of hydraulic fracturing fluids, and historical industry operations and waste disposal practices.
Many states have raised state taxes on energy sources or state taxes associated with the extraction of hydrocarbons, and additional increases, unexpectedly may occur. In addition, there has been a significant amount of discussion by legislators and presidential administrations concerning a variety of energy tax proposals.
Many states have raised state taxes on energy sources or state taxes associated with the extraction of hydrocarbons, and additional increases may occur unexpectedly. In addition, there has been a significant amount of discussion by legislators and presidential administrations concerning a variety of energy tax proposals.
Potential adverse effects could include more stringent air emissions regulations and disruption of our production activities, including, for example, damages to our facilities from winds or floods, increases in our costs of operation, or reductions in the efficiency of our operations, increases in market prices of or limited access to raw materials such as energy and water, impacts on our personnel, supply chain, or distribution chain, as well as potentially increased costs for insurance coverages in the aftermath of such effects.
Potential adverse effects could include more stringent air emissions regulations and disruption of our production activities, including, for example, damages to our facilities from winds or floods, increases in our costs of operation, or reductions in the efficiency of our operations, increases in market prices of or limited access to raw materials such as energy and water, impacts on our personnel, supply chain, or distribution chain, as well as potentially increased costs for and availability of insurance coverages in the aftermath of such effects.
To date we have not experienced any material losses relating to cyber-attacks; however, there can be no assurance that we will not suffer such losses in the future. Consequently, it is possible that any of these occurrences, or a combination of them, could have a material adverse effect on our business, financial condition, and results of operations.
To date we have not experienced any material losses relating to cyber-attacks; however, there can be no assurance 47 that we will not suffer such losses in the future. Consequently, it is possible that any of these occurrences, or a combination of them, could have a material adverse effect on our business, financial condition, and results of operations.
This concentration of customers may impact our overall credit risk since these entities may be similarly affected by changes in economic, political, and other conditions. We are exposed to credit risk in the event of default of any of our counterparties, principally with respect to hedging agreements, but also with respect to insurance contracts and bank lending commitments.
This concentration of customers may impact our overall credit risk since these entities may be similarly affected by changes in economic, political, and other conditions. 48 We are exposed to credit risk in the event of default of any of our counterparties, principally with respect to hedging agreements, but also with respect to insurance contracts and bank lending commitments.
Such changes include, but are not limited to, (i) the repeal of the percentage depletion allowance for oil and gas properties; (ii) the elimination of current deductions for intangible drilling and development costs; (iii) the elimination of the deduction for certain U.S. production activities; and (iv) an extension of the amortization period for certain geological and geophysical expenditures.
Such changes include, but are not limited to, (i) the repeal of the percentage depletion allowance for oil and gas properties; (ii) the elimination 56 of current deductions for intangible drilling and development costs; (iii) the elimination of the deduction for certain U.S. production activities; and (iv) an extension of the amortization period for certain geological and geophysical expenditures.
Any of these risks could adversely affect our ability to conduct operations or result in substantial losses to us as a result of: • injury or loss of life; • damage to and destruction of property, natural resources, and equipment; • pollution and other environmental and natural resource damages; • regulatory investigations and penalties; • suspension of our operations; and • repair and remediation costs.
Any of these risks could adversely affect our ability to conduct operations or result in substantial losses to us as a result of: • injury or loss of life; • damage to and destruction of property, natural resources, and equipment; • pollution and other environmental and natural resource damages; • regulatory investigations and penalties; • suspension of our operations; and 44 • repair and remediation costs.
In addition, the proposed rule would establish “Emissions Guidelines,” creating a Subpart OOOOc that would require states to develop plans to reduce methane emissions from existing sources that must be at least as effective as presumptive standards set by the EPA. In November 2022, the EPA issued a proposed rule supplementing the November 2021 proposed rule.
In addition, the proposed rule sought to establish “Emissions Guidelines,” creating a Subpart OOOOc that would require states to develop plans to reduce methane emissions from existing sources that must be at least as effective as presumptive standards set by the EPA. In November 2022, the EPA issued a proposed rule supplementing the November 2021 proposed rule.
Further, failure or a perception (whether or not valid) of failure to implement our ESG strategy or achieve sustainability goals and targets we have set, including emissions reduction goals, could damage our reputation, causing our investors or consumers to lose confidence in our Company and negatively impact our operations.
Further, failure or a perception (whether or not valid) of failure to implement our sustainability strategy or achieve sustainability goals and targets we have set, including emissions reduction goals, could damage our reputation, causing our investors or consumers to lose confidence in our Company and negatively impact our operations.
Increasing attention from governmental and regulatory bodies, investors, consumers, industry, and other stakeholders on combatting climate change, together with changes in consumer and industrial/commercial behavior, societal expectations on companies to address climate change, investor and societal expectations regarding voluntary climate-related disclosures, preferences and attitudes with respect to the generation and consumption of energy, the use of hydrocarbons, and the use of products manufactured with, or powered by, hydrocarbons, may result in the enactment of climate change-related regulations, policies, and initiatives (at the government, regulator, corporate, and/or investor community levels), including alternative energy requirements, new fuel consumption standards, energy conservation and emissions reductions, measures and responsible 52 Table of Contents energy development; technological advances with respect to the generation, transmission, storage, and consumption of energy (including advances in wind, solar, and hydrogen power, as well as battery technology); increased availability of, and increased demand from consumers and industry for, energy sources other than crude oil and natural gas (including wind, solar, nuclear, and geothermal sources as well as electric vehicles); and development of, and increased demand from consumers and industry for, lower-emission products and services (including electric vehicles and renewable residential and commercial power supplies) as well as more efficient products and services.
Increasing attention from governmental and regulatory bodies, investors, consumers, industry, and other stakeholders on combatting climate change, together with changes in consumer and industrial/commercial behavior, societal expectations on companies to address climate change, investor and societal expectations regarding voluntary climate-related disclosures, preferences and attitudes with respect to the generation and consumption of energy, the use of hydrocarbons, and the use of products manufactured with, or powered by, hydrocarbons, may result in the enactment of climate change-related regulations, policies, and initiatives (at the government, regulator, corporate, and/or investor community levels), including alternative energy requirements, new fuel consumption standards, energy conservation and emissions reductions, measures and responsible energy development; technological advances with respect to the generation, transmission, storage, and consumption of energy (including advances in wind, solar, and hydrogen power, as well as battery technology); increased availability of, and increased demand from consumers and industry for, energy sources other than crude oil and natural gas (including wind, solar, nuclear, and geothermal sources as well as electric vehicles); and development of, and increased demand from consumers and industry for, lower-emission products and services (including electric vehicles and renewable residential and commercial power supplies) as well as more efficient products and services.
As a consequence of these various limitations and restrictions, we may not be able to make, or may have to reduce or eliminate at any time, the payment of dividends on our common stock.
As a consequence of these various limitations and restrictions, we may not be able to make, or may have to reduce or eliminate at any time, the payment of dividends on or repurchase of our common stock.
The failure of an operator of wells in which we have an interest to adequately perform operations, or an operator’s breach of applicable agreements, could reduce production and revenues we receive from that well.
The failure of an operator of wells in which we have an interest to adequately perform operations, or an operator’s breach of applicable agreements, could reduce production and revenues we 43 receive from that well.
The proposed rule would make the existing regulations in Subpart OOOOa more stringent and create a Subpart OOOOb to expand reduction requirements for new, modified, and reconstructed oil and gas sources, including standards focusing on certain source types that have never been regulated under the CAA (including intermittent vent pneumatic controllers, associated gas, and liquids unloading facilities).
The proposed rule sought to make the existing regulations in Subpart OOOOa more stringent and create a Subpart OOOOb to expand reduction requirements for new, modified, and reconstructed oil and gas sources, including standards focusing on certain source types that have never been regulated under the CAA (including intermittent vent pneumatic controllers, associated gas, and liquids unloading facilities).
Item 1. Business - Regulation of the Crude Oil and Natural Gas Industry ” for more information regarding the new and proposed state environmental regulations applicable to our business. In addition, there have been several citizen/activist lawsuits filed against industry and state and local regulators associated with air quality, siting, environmental justice, and climate change.
Business - Regulation of the Crude Oil and Natural Gas Industry ” for more information regarding the new and proposed state environmental regulations applicable to our business. In addition, there have been several citizen/activist lawsuits filed against industry and state and local regulators associated with air quality, siting, environmental justice, and climate change.
While we create and publish voluntary disclosures regarding ESG matters from time to time, some of the statements in those voluntary disclosures may be based on hypothetical expectations and assumptions that may or may not be representative of current or actual risks or events or forecasts of expected risks or events, including the costs associated therewith.
While we create and publish voluntary disclosures regarding sustainability matters from time to time, some of the statements in those voluntary disclosures may be based on hypothetical expectations and assumptions that may or may not be representative of current or actual risks or events or forecasts of expected risks or events, including the costs associated therewith.
SB 181’s requirement, which applies to our Colorado operations, that we own or control more than 45% of the working or mineral interest in order to statutorily pool our applicable interest may make it much more difficult for us to develop such interests, which could have a material adverse effect on our business, financial condition, and results of operations.
These efforts could have a material adverse effect on our business, financial condition, and results of operations. 52 SB 181’s requirement, which applies to our Colorado operations, that we own or control more than 45% of the working or mineral interest in order to statutorily pool our applicable interest may make it much more difficult for us to develop such interests, which could have a material adverse effect on our business, financial condition, and results of operations.
Such expectations and assumptions are necessarily uncertain and may be prone to error or subject to misinterpretation given the long timelines involved and the lack of an established single approach to identifying, measuring, and reporting on many ESG matters.
Such expectations and assumptions are necessarily uncertain and may be prone to error or subject to misinterpretation given the long timelines involved and the lack of an established single approach to identifying, measuring, and reporting on many sustainability matters.
Our continuing efforts to research, establish, accomplish and accurately report on the implementation of our ESG strategy, including any ESG goals, may also create additional operational risks and expenses and expose us to reputational, legal and other risks.
Our continuing efforts to research, establish, accomplish and accurately report on the implementation of our sustainability strategy, including any sustainability goals, may also create additional operational risks and expenses and expose us to reputational, legal and other risks.
Among other things, the November 2022 supplemental proposed rule removes an emissions monitoring exemption for small wellhead-only sites and creates a new third-party monitoring program to flag large emissions events, referred to in the proposed rule as “super emitters.” The EPA announced a final rule in December 2023, which, among other things, requires the phase out of routine flaring of natural gas from new crude oil wells and routine leak monitoring at all well sites and compressor stations.
Among other things, the November 2022 supplemental proposed rule removed an emissions monitoring exemption for small wellhead-only sites and created a new third-party monitoring program to flag large emissions events, referred to in the proposed rule as “super emitters.” The EPA announced a final rule in December 2023, which, among other things, requires the phase out of routine flaring of natural gas from new crude oil wells and routine leak monitoring at all well sites and compressor stations.
In addition, enhanced climate disclosure requirements could accelerate the trend of certain stakeholders and lenders restricting or seeking more stringent conditions with respect to their investments in certain carbon-intensive sectors. See “Item 1. Business - Climate Change ” for a further discussion of the laws and regulations related to GHGs and of climate change.
In addition, any enhanced climate disclosure requirements could accelerate the trend of certain stakeholders and lenders restricting or seeking more stringent conditions with respect to their investments in certain carbon-intensive sectors. See “ Item 1. Business - Climate Change ” for a further discussion of the laws and regulations related to GHGs and climate change.
Our Board’s determination with respect to any such dividends, including the record date, the payment date and the actual amount of the dividend, will depend upon, among other things, our profitability and financial condition, contractual restrictions, restrictions imposed by applicable law, and other factors that our Board deems relevant at the time of such determination.
Our Board’s determination with respect to any such stock repurchases or dividends, including with respect to dividends, the record date, the payment date and the actual amount of the dividend, will depend upon, among other things, our profitability and financial condition, contractual restrictions, restrictions imposed by applicable law, and other factors that our Board deems relevant at the time of such determination.
Climate change laws and regulations restricting emissions of greenhouse gases could result in increased operating costs and reduced demand for the crude oil and natural gas that we produce, while the physical effects of climate change could disrupt our production and cause us to incur significant costs in preparing for or responding to those effects.
Climate change laws and regulations restricting emissions of GHGs could result in increased operating costs and reduced demand for the crude oil and natural gas that we produce, while the physical effects of climate change could disrupt our production and cause us to incur significant costs in preparing for or responding to those effects.
More broadly, the enactment of climate change-related policies and initiatives across the market at the corporate level and/or investor community level may in the future result in increases in our compliance costs and other operating costs and have other adverse effects (e.g., greater potential 53 Table of Contents for governmental investigations or litigation).
More broadly, the enactment of climate change-related policies and initiatives across the market at the corporate level and/or investor community level may in the future result in increases in our compliance costs and other operating costs and have other adverse effects (e.g., greater potential for governmental investigations or litigation).
The adoption of legislation or regulatory programs to reduce emissions of GHGs (including carbon pricing schemes), or the adoption and implementation of regulations that require reporting of GHG emissions or other climate-related information, could adversely affect our business and our industry, including by requiring us to incur increased operating costs, such as costs to purchase and operate emissions and vapor control systems, to acquire emissions allowances, or to comply with new regulatory or reporting requirements as well as by restricting our ability to execute on our business strategy, reducing our access to financial markets, or creating greater potential for governmental investigations or litigation.
The adoption and implementation of new or more stringent federal, state, or local legislation or regulatory programs to reduce emissions of GHGs (including carbon pricing schemes), or that require reporting of GHG emissions or other climate-related information, could adversely affect our business and our industry, including by requiring us to incur increased operating costs, such as costs to purchase and operate emissions and vapor control systems, to acquire emissions allowances, or to comply with new regulatory or reporting requirements as well as by restricting our ability to execute on our business strategy, reducing our access to financial markets, or creating greater potential for governmental investigations or litigation.
We may not be able to recover some or any of these costs from insurance. 50 Table of Contents Evolving legislation or regulatory initiatives, including those related to hydraulic fracturing, could result in increased costs and additional operating restrictions or delays.
We may not be able to recover some or any of these costs from insurance. Evolving legislation or regulatory initiatives, including those related to hydraulic fracturing, could result in increased costs and additional operating restrictions or delays.
In addition, our continuing efforts to research, establish, accomplish, and accurately report on the implementation of our ESG strategy, including any specific ESG objectives, may also create additional operational risks and expenses and expose us to reputational, legal, and other risks.
In addition, our continuing efforts to research, establish, accomplish, and accurately report on the implementation of our sustainability strategy, including any specific sustainability objectives, may also create additional operational risks and 55 expenses and expose us to reputational, legal, and other risks.
Any such changes to ad valorem and severance tax laws in the states we operate in could negatively affect our financial condition, results of operations, and cash flow. On August 16, 2022, legislation commonly known as the Inflation Reduction Act was signed into law.
Any such changes to ad valorem and severance tax laws in the states we operate in could negatively affect our financial condition, results of operations, and cash flow. On August 16, 2022, the Inflation Reduction Act was signed into law.
In addition, our ability to pay cash dividends to our stockholders may be limited by covenants in any debt agreements that we are currently a party to, including the Credit Facility and the indentures governing our senior notes, or may enter into in the future.
In addition, our ability to pay cash dividends to and conduct stock repurchases from our stockholders may be limited by covenants in any debt agreements that we are currently a party to, including the Credit Facility and the indentures governing our senior notes, or may enter into in the future.
Our ability to declare and pay dividends to our stockholders is subject to certain laws, regulations, and policies, including minimum capital requirements and, as a Delaware corporation, we are subject to certain restrictions on dividends under the Delaware General Corporation Law (the “DGCL”).
Our ability to declare and pay dividends to and conduct stock repurchases from our stockholders is subject to certain laws, regulations, and policies, including minimum capital requirements and, as a Delaware corporation, we are subject to certain restrictions on dividends and stock repurchases under the Delaware General Corporation Law (the “DGCL”).
The terms of our oil and gas leases often stipulate that the lease will terminate if not held by production, rentals, or otherwise some form of an extension payment to extend the term of the lease. As of December 31, 2023, approximately 25,100 net acres of our properties were not held by production.
The terms of our oil and gas leases often stipulate that the lease will terminate if not held by production, rentals, or otherwise some form of an extension payment to extend the term of the lease. As of December 31, 2024, approximately 17,600 net acres of our properties were not held by production.
If we reduce our use of derivatives as a result of the Dodd-Frank Act and regulations, our results of operations may be more volatile and our cash flows may be less predictable, which could adversely affect our ability to plan for and fund capital expenditures. We may be involved in legal cases that may result in substantial liabilities.
If we reduce our use of derivatives as a result of the Dodd-Frank Act and regulations, our results of operations may be more volatile and our cash flows may be less predictable, which could adversely affect our ability to plan for and fund capital expenditures.
Under the DGCL, our Board may not authorize payment of a dividend unless it is either paid out of our surplus, as calculated in accordance with the DGCL, or if we do not have a surplus, it is paid out of our net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year.
Under the DGCL, our Board may not authorize a dividend or repurchase of our common stock unless such dividend or repurchase is either paid for out of our surplus, as calculated in accordance with the DGCL, or if we do not have a surplus, such dividend or repurchase is paid for out of our net profits for the fiscal year in which such dividend is declared or stock repurchase conducted and/or the preceding fiscal year.
Joint interest receivables arise from billing entities who own partial interest in the wells we operate. These entities participate in our wells primarily based on their ownership in leases on which we wish to drill.
Joint interest receivables arise from billing entities who own partial interest in the wells we operate. These entities participate in our wells primarily based on their ownership in leases on which we wish to drill. We can do very little to choose who participates in our wells.
Our ability to pay dividends to our stockholders is restricted by applicable laws and regulations and requirements under certain of our debt agreements, including the Credit Facility and the indentures governing our senior notes.
Our ability to pay dividends to, or repurchase shares of common stock from, our stockholders is restricted by applicable laws and regulations and requirements under certain of our debt agreements, including the Credit Facility and the indentures governing our senior notes.
Our principal exposures to credit risk are through receivables resulting from commodity price derivatives instruments, joint interest billings, and other components totaling $247.2 million at December 31, 2023, and the sale of our crude oil, natural gas, and NGL totaling $506.0 million in receivables at December 31, 2023, which we market to energy marketing companies, refineries, and affiliates.
Our principal exposures to credit risk are through receivables resulting from commodity price derivatives instruments, joint interest billings, and other components totaling $125.0 million as of December 31, 2024, and the sale of our crude oil, natural gas, and NGL totaling $646.3 million in receivables as of December 31, 2024, which we market to energy marketing companies, refineries, and affiliates.
We are subject to health, safety, and environmental laws and regulations that may expose us to significant costs and liabilities. We are subject to stringent and complex federal, state, and local laws and regulations governing public health and occupational safety, the discharge of materials into the environment, noise emittance, light emittance, and the general protection of the environment and wildlife.
We are subject to stringent and complex federal, state, and local laws and regulations governing public health and occupational safety, the discharge of materials into the environment, noise emittance, light emittance, and the general protection of the environment and wildlife.
While we do not currently expect the Inflation Reduction Act to have a material impact on our effective tax rate, our analysis of the effect of the Inflation Reduction Act on us is ongoing and incomplete, and it is possible that the Inflation Reduction Act (or implementing regulations and other guidance, which have not yet been issued) could adversely impact our current and deferred federal tax liability.
While we do not currently expect the Inflation Reduction Act to have a material impact on our effective tax rate, it is possible that the Inflation Reduction Act (or implementing regulations and other guidance) could adversely impact our current and deferred federal tax liability.
Among other things, the Inflation Reduction Act includes a 1% excise tax on corporate stock repurchases, applicable to repurchases after December 31, 2022, and also a new minimum tax based on book income. We are in the process of evaluating the potential impacts of the Inflation Reduction Act to us.
Among other things, the Inflation Reduction Act includes a 1% excise tax on corporate stock repurchases, applicable to repurchases after December 31, 2022, and also a new minimum tax based on book income.
It is possible that market conditions at the time of negotiation could require us to agree to new leases on less favorable terms to us than the terms of the expired leases or cause us to lose the leases entirely.
It is possible that market conditions at the time of negotiation could require us to agree to new leases on less favorable terms to us than the terms of the expired leases or cause us to lose the leases entirely. If our leases expire, we will lose our right to develop the related properties.
For these properties, if production in paying quantities is not established on units containing leases during the next year, then approximately 4,600 net acres will expire in 2024, approximately 9,600 net acres will expire in 2025, and approximately 10,900 net acres will expire in 2026 and thereafter.
For these properties, if production in paying quantities is not established on units containing leases during the next year, then approximately 7,800 net acres will expire in 2025, approximately 5,400 net acres will expire in 2026, and approximately 4,400 net acres will expire in 2027 and thereafter.
Delaware law prohibits us from engaging in any business combination with any “interested stockholder,” meaning generally that a stockholder who beneficially owns more than 15% of our stock cannot acquire us for a period of three years from the date such stockholder became an interested stockholder, unless various conditions are met, such as approval of the transaction by our Board. 58 Table of Contents The Crestone Peak Stockholder is a significant holder of our common stock and may have some ability to influence our management and affairs.
Delaware law prohibits us from engaging in any business combination with any “interested stockholder,” meaning generally that a stockholder who beneficially owns more than 15% of our stock cannot acquire us for a period of three years from the date such stockholder became an interested stockholder, unless various conditions are met, such as approval of the transaction by our Board.
If our Board elects to issue preferred stock, it could be more difficult for a third party to acquire us.
Our certificate of incorporation authorizes our Board to issue preferred stock without stockholder approval. If our Board elects to issue preferred stock, it could be more difficult for a third party to acquire us.
In particular, a significant or extended decline in crude oil, natural gas, and NGL prices could have a material adverse effect on the sales price of our common stock.
In particular, a significant or extended decline in crude oil, natural gas, and NGL prices could have a material adverse effect on the sales price of our common stock. Other risks described in this annual report could also materially and adversely affect our share price.
Such anti-development efforts are likely to continue in the future, which could result in dramatically reducing the area of future oil and gas development in the states in which we conduct our operations. These efforts could have a material adverse effect on our business, financial condition, and results of operations.
Such anti-development efforts are likely to continue in the future, which could result in dramatically reducing the area of future oil and gas development in the states in which we conduct our operations.
However, we cannot assure you that our future acquisition, development, and exploration activities will result in any specific amount of additional proved reserves or that we will be able to drill productive wells at acceptable costs. We may incur substantial losses and be subject to substantial liability claims as a result of our crude oil and natural gas operations.
However, we cannot assure you that our future acquisition, development, and exploration activities will result in any specific amount of additional proved reserves or that we will be able to drill productive wells at acceptable costs.
In general, production from oil and gas properties declines as reserves are depleted, with the rate of decline depending on reservoir characteristics. Our current proved reserves will decline as reserves are produced and, therefore, our level of production and cash flows will be affected adversely unless we conduct successful exploration and development activities or acquire properties containing proved reserves.
Our current proved reserves will decline as reserves are produced and, therefore, our level of production and cash flows will be affected adversely unless we conduct successful exploration and development activities or acquire properties containing proved reserves.
Any such changes in U.S. federal income tax law could eliminate or defer certain tax deductions within the industry that are currently available with respect to oil and gas exploration and development, and any such change could negatively affect our financial condition, results of operations, and cash flow. 55 Table of Contents In the states we operate in, there may be proposals for legislative changes that, if enacted into law, could substantially increase our severance tax and ad valorem tax effective rates.
Any such changes in U.S. federal income tax law could eliminate or defer certain tax deductions within the industry that are currently available with respect to oil and gas exploration and development, and any such change could negatively affect our financial condition, results of operations, and cash flow.
We can do very little to choose who participates in our wells. 54 Table of Contents We are also subject to credit risk due to concentration of our crude oil, natural gas, and NGL receivables with significant customers.
We are also subject to credit risk due to concentration of our crude oil, natural gas, and NGL receivables with significant customers.
Therefore, our undeveloped reserves may not be ultimately developed or produced. Approximately 22% of our total proved reserves were classified as proved undeveloped as of December 31, 2023. Development of these reserves may take longer and require higher levels of capital expenditures than we currently anticipate or that may be available to us.
The development of our proved undeveloped reserves may take longer and may require higher levels of capital expenditures than we currently anticipate. Therefore, our undeveloped reserves may not be ultimately developed or produced.
Other risks described in this annual report could also materially and adversely affect our share price. 57 Table of Contents Although our common stock is listed on the New York Stock Exchange, we cannot assure you that an active public market will continue for our common stock or that we will be able to continue to meet the listing requirements of the NYSE.
Although our common stock is listed on the New York Stock Exchange (the “NYSE”), we cannot assure you that an active public market will continue for our common stock or that we will be able to continue to meet the listing requirements of the NYSE.
Certain segments of the investor community have developed negative sentiment towards investing in our industry, and such negative sentiment and related reputational risks may also adversely affect our ability to successfully carry out our business strategy by adversely affecting our access to capital.
If one or more of the technologies we use now or in the future were to become obsolete, our business, financial condition, or results of operations could be materially and adversely affected. 54 Certain segments of the investor community have developed negative sentiment towards investing in our industry, and such negative sentiment and related reputational risks may also adversely affect our ability to successfully carry out our business strategy by adversely affecting our access to capital.
Judgments and estimates to determine accruals or range of losses related to legal and other cases could change from one period to the next, and such changes could be material.
Judgments and estimates to determine accruals or range of losses related to legal and other cases could change from one period to the next, and such changes could be material. Terrorist attacks and armed conflict could have a material adverse effect on our business, financial condition, or results of operations.
We cannot assure you, however, that we will pay dividends in the future in the current amounts or at all. Our Board may change the timing and amount of any future dividend payments or eliminate the payment of future dividends to our common stockholders at its discretion, without notice to our stockholders.
Our Board may change the timing and amount of any future stock repurchases or dividend payments or eliminate such stock repurchases or the payment of future dividends to our common stockholders at its discretion, without notice to our stockholders.
The final rule gives states, along with federal tribes that wish to regulate existing sources, two years to develop and submit their plans for reducing methane from existing sources. The final emissions guidelines under Subpart OOOOc provide three years from the plan submission deadline for 51 Table of Contents existing sources to comply.
The final rule gives states, along with federal tribes that wish to regulate existing sources, two years to develop and submit their plans for reducing methane from existing sources until March 2026. The final emissions guidelines under Subpart OOOOc provide until 2029 for existing sources to comply. The final rule is subject to ongoing litigation but remains in effect.
Moreover, incentives to conserve energy or use alternative energy sources as a means of addressing climate change could reduce demand for the crude oil and natural gas we produce.
Consequently, legislation and regulatory programs to reduce emissions of GHGs could have an adverse effect on our business, financial condition, and results of operations. Moreover, incentives to conserve energy or use alternative energy sources as a means of addressing climate change could reduce demand for the crude oil and natural gas we produce.
The occurrence of one of these operating hazards may result in injury, loss of life, suspension of operations, environmental damage and remediation liability, and/or governmental investigations and penalties.
The occurrence of one of these operating hazards may result in injury, loss of life, suspension of operations, environmental damage and remediation liability, and/or governmental investigations and penalties. The payment of any of these liabilities could reduce, or even eliminate, the funds available for exploration and development, or could result in a loss of our properties.
Federal Reserve and other central banks to continue to increase interest rates, which could have the effects of raising the cost of capital and depressing economic growth, either of which, or the combination thereof, could hurt the financial and operating results of our business. 56 Table of Contents We are subject to cyber security risks.
Federal Reserve and other central banks to increase interest rates, which could have the effects of raising the cost of capital and depressing economic growth, either of which, or the combination thereof, could hurt the financial and operating results of our business. 57 Risks Related to Our Common Stock We have experienced recent volatility in the market price and trading volume of our common stock and may continue to do so in the future.
Our lack of control over non-operated properties also makes it more difficult for us to forecast capital expenditures, revenues, production, liability, and other related matters. 47 Table of Contents The development of our proved undeveloped reserves may take longer and may require higher levels of capital expenditures than we currently anticipate.
Our lack of control over non-operated properties also makes it more difficult for us to forecast capital expenditures, revenues, production, liability, and other related matters.
Certain of our undeveloped leasehold acreage is subject to leases that will expire over the next several years unless production is established on units containing the acreage.
In sum, the cost of drilling, completing, and operating any well is often uncertain, and new wells may not be productive. 41 Certain of our undeveloped leasehold acreage is subject to leases that will expire over the next several years unless production is established on units containing the acreage.
For example, we depend on digital technologies to interpret seismic data, manage drilling rigs, production equipment, and gathering and transportation systems, conduct reservoir modeling and reserves estimation, and process and record financial and operating data. Pipelines, refineries, power stations, and distribution points for both fuels and electricity are increasingly more interconnected by computer systems.
The oil and gas industry is highly dependent on digital technologies to conduct certain exploration, development, production, processing, and distribution activities. For example, we depend on digital technologies to interpret seismic data, manage drilling rigs, production equipment, and gathering and transportation systems, conduct reservoir modeling and reserves estimation, and process and record financial and operating data.
Our certificate of incorporation and bylaws, as well as Delaware law, contain provisions that could discourage acquisition bids or merger proposals, even if such acquisition or merger may be in our stockholders’ best interests. Our certificate of incorporation authorizes our Board to issue preferred stock without stockholder approval.
Any elimination of, or revision in, our stock repurchase program or dividend policy could have a material adverse effect on the market price of our common stock. 58 Our certificate of incorporation and bylaws, as well as Delaware law, contain provisions that could discourage acquisition bids or merger proposals, even if such acquisition or merger may be in our stockholders’ best interests.
Further, initial production rates reported by us or other operators may not be indicative of future or long-term production rates. In sum, the cost of drilling, completing, and operating any well is often uncertain, and new wells may not be productive.
Further, initial production rates reported by us or other operators may not be indicative of future or long-term production rates.
Terrorist attacks and armed conflict could have a material adverse effect on our business, financial condition, or results of operations. Terrorist attacks and armed conflict may significantly affect the energy industry, including our operations and those of our current and potential customers, as well as general economic conditions, consumer confidence and spending, and market liquidity.
Terrorist attacks and armed conflict may significantly affect the energy industry, including our operations and those of our current and potential customers, as well as general economic conditions, consumer confidence and spending, and market liquidity. Strategic targets, such as energy-related assets, may be at greater risk of future attacks than other targets in the U.S.
The payment of any of these liabilities could reduce, or even eliminate, the funds available for exploration and development, or could result in a loss of our properties. 49 Table of Contents As is customary in the oil and gas industry, we maintain insurance against some, but not all, of these potential risks and losses.
As is customary in the oil and gas industry, we maintain insurance against some, but not all, of these potential risks and losses.
If our leases expire, we will lose our right to develop the related properties. 48 Table of Contents Unless we replace our crude oil and natural gas reserves, our reserves and production will decline, which could adversely affect our business, financial condition, and results of operations.
Unless we replace our crude oil and natural gas reserves, our reserves and production will decline, which could adversely affect our business, financial condition, and results of operations. In general, production from oil and gas properties declines as reserves are depleted, with the rate of decline depending on reservoir characteristics.
Private individuals or public entities may seek to enforce environmental laws and regulations against us and could allege personal injury, property damages, or other liabilities. While our business is not a party to any such litigation, we could be named in actions making similar allegations.
Private individuals or public entities may seek to enforce environmental laws and regulations against us and could allege personal injury, property damages, or other liabilities. An unfavorable ruling in any such case could significantly impact our operations and could have an adverse impact on our financial condition.
We cannot assure that any such outcome would not be material, and any such outcome could have a material adverse impact on our cash flows and results of operations.
We cannot assure that any such outcome would not be material, and any such outcome could have a material adverse impact on our cash flows and results of operations. We face increasing risk associated with the long-term trend toward increased activism against oil and gas exploration and development activities in the states in which we operate, particularly in Colorado.
Negative public perception could cause the permits we require to conduct our operations to be withheld, delayed, or burdened by requirements that restrict our ability to profitably conduct our business. In addition, various officials and candidates at the federal, state, and local levels have made climate-related pledges or proposed banning hydraulic fracturing altogether.
In addition, various officials and candidates at the federal, state, and local levels have made climate-related pledges or proposed banning hydraulic fracturing altogether.
We may not be able to respond to these competitive pressures or implement new technologies on a timely basis or at an acceptable cost. If one or more of the technologies we use now or in the future were to become obsolete, our business, financial condition, or results of operations could be materially and adversely affected.
We may not be able to respond to these competitive pressures or implement new technologies on a timely basis or at an acceptable cost.
As an example, during the 2023 calendar year, the closing sales price of our common stock ranged from a low of $54.58 per share to a high of $85.24 per share.
The trading price of shares of our common stock has fluctuated widely and in the future may be subject to similar fluctuations. As an example, during the 2024 calendar year, the closing sales price of our common stock ranged from a low of $42.79 per share to a high of $78.16 per share.
Consequently, it is possible that any of these occurrences, or a combination of them, could have a material adverse effect on our business, financial condition, and results of operations. We have limited control over activities on properties in which we own an interest but we do not operate, which could reduce our production and revenues.
Further, as a result of any of these developments, we could incur material impairments of our oil and gas properties and the value of our undeveloped acreage could decline in the future. We have limited control over activities on properties in which we own an interest but we do not operate, which could reduce our production and revenues.
Any such legislation or regulatory programs could also increase the cost of consuming, and thereby reduce demand for, the crude oil and natural gas we produce. Consequently, legislation and regulatory programs to reduce emissions of GHGs could have an adverse effect on our business, financial condition, and results of operations.
Any such legislation or regulatory programs could also increase the cost of consuming, and thereby reduce demand for, the crude oil and natural gas we produce. While the Supreme Court’s decision in Loper Bright Enterprises v. Raimondo to overrule Chevron U.S.A.
An unfavorable ruling in any such case could significantly impact our operations and could have an adverse impact on our financial condition. Moreover, governmental authorities exercise considerable discretion in the timing and scope of permit issuance and the public may engage in the permitting process, including through intervention in the courts.
Moreover, governmental authorities exercise considerable discretion in the timing and scope of permit issuance and the public may engage in the permitting process, including through intervention in the courts. Negative public perception could cause the permits we require to conduct our operations to be withheld, delayed, or burdened by requirements that restrict our ability to profitably conduct our business.
We are exposed to credit risks of our hedging counterparties, third parties participating in our wells, and our customers.
In addition, these types of derivative arrangements may limit the benefit we would receive from increases in the prices for crude oil and natural gas and may expose us to cash margin requirements. We are exposed to credit risks of our hedging counterparties, third parties participating in our wells, and our customers.
In May 2021, we announced the initiation of a quarterly base cash dividend and, in March 2022, the Board approved the initiation of a quarterly variable cash dividend, assuming pro forma compliance with certain leverage targets. The decision to pay any future dividends is solely within the discretion of, and subject to approval by, our Board.
The decision to pay any future dividends or conduct future stock repurchases is solely within the discretion of, and subject to approval by, our Board.
The Dodd-Frank Act also establishes margin requirements and certain transaction clearing and trade execution requirements. The Dodd-Frank Act may require us to comply with margin requirements in our derivative activities, although the application of those provisions to us is uncertain at this time.
The Dodd-Frank Act also establishes margin requirements and certain transaction clearing and trade execution requirements. The Dodd-Frank Act requires certain parties to derivative contracts to comply with margin requirements, though we likely qualify for a commercial end-user exemption from such requirements.
Removed
Strategic targets, such as energy-related assets, may be at greater risk of future attacks than other targets in the U.S. Our insurance may not protect against such occurrences.
Added
Item 1. Business - Estimated Proved Reserves ” of this Annual Report on Form 10-K for information about our estimated crude oil and natural gas reserves and the PV-10 (a non-GAAP financial measure) as of December 31, 2024, 2023, and 2022. In order to prepare our estimates, we must project production rates and the timing of development expenditures.
Removed
The presence of H 2 S, a toxic, flammable, and colorless gas, is a common risk in the oil and gas industry and may be present in small amounts for brief periods from time to time at our well and facility locations.
Added
We must also analyze available geological, geophysical, production, and engineering data. The extent, quality, and reliability of this data can vary.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThis program requires the EPA to impose a “waste emissions charge” on certain oil and gas sources that are already required to report under EPA’s Greenhouse Gas Reporting Program. In order to implement the program, the Inflation Reduction Act required revisions to GHG reporting regulations for petroleum and natural gas systems (Subpart W) by 2024.
Biggest changeAmong other things, the Inflation Reduction Act amends the CAA to include a Methane Emissions and Waste Reduction Incentive Program for petroleum and natural gas systems. This program requires the EPA to impose a “Waste Emissions Charge” on certain oil and gas sources that are already required to report under EPA’s Greenhouse Gas Reporting Program.
Framework Convention on Climate Change 26 th Conference of the Parties (“COP26”) held in Glasgow, Scotland in November 2021, advancing a Global Methane Pledge along with the European Union, which aims to cut global methane emissions at least 30% by 2030 relative to 2020 levels, including “all feasible reductions” in the energy sector.
Framework Convention on Climate Change 26 th Conference of the Parties held in Glasgow, Scotland in November 2021, advancing a Global Methane Pledge along with the European Union, which aims to cut global methane emissions at least 30% by 2030 relative to 2020 levels, including “all feasible reductions” in the energy sector.
In addition, other laws require the reporting on use of hazardous and toxic chemicals. For example, the oil and gas extraction industry and natural gas processing facilities that receive and refine natural gas are required to report releases of certain “toxic chemicals” under the Toxic Release Inventory (“TRI”) program under the Emergency Planning and Community Right-to-Know Act.
In addition, other laws require the reporting on use of hazardous and toxic chemicals. For example, the oil and gas extraction industry and natural gas processing facilities that receive and refine natural gas are required to report releases of certain “toxic chemicals” under the Toxic Release Inventory program under the Emergency Planning and Community Right-to-Know Act.
Colorado, the state in which we own and operate many of our properties, as well as Texas and New Mexico, have regulations governing conservation matters, including provisions for the spacing and unitization or pooling of crude oil and natural gas properties, the regulation of well spacing and well density, and procedures for proper plugging and abandonment of wells and associated facilities.
Colorado, the state in which we own and operate many of 26 our properties, as well as Texas and New Mexico, have regulations governing conservation matters, including provisions for the spacing and unitization or pooling of crude oil and natural gas properties, the regulation of well spacing and well density, and procedures for proper plugging and abandonment of wells and associated facilities.
Under these laws, we could be required to remove or remediate previously disposed wastes (including wastes disposed of or released by prior owners or operators), to clean up contaminated property (including groundwater contaminated by prior owners or operators), to pay for damages for the loss or impairment of natural resources, and to take measures to prevent future contamination from our operations.
Under these laws, we could be required to remove or remediate previously disposed wastes (including wastes disposed of or released by prior owners or operators), to clean up contaminated property (including groundwater contaminated by prior owners or operators), to pay for 33 damages for the loss or impairment of natural resources, and to take measures to prevent future contamination from our operations.
In addition, the proposed rule would establish “Emissions Guidelines,” creating a Subpart OOOOc that would require states to develop plans to reduce methane emissions from existing sources that must be at least as effective as presumptive standards set by the EPA. In November 2022, the EPA issued a proposed rule supplementing the November 2021 proposed rule.
In addition, the proposed rule sought to establish “Emissions Guidelines,” creating a Subpart OOOOc that would require states to develop plans to reduce methane emissions from existing sources that must be at least as effective as presumptive standards set by the EPA. In November 2022, the EPA issued a proposed rule supplementing the November 2021 proposed rule.
In addition, in light of concerns about seismic activity potentially being triggered by the injection of produced waters into underground wells, regulators in the states in which we operate have adopted additional requirements related to seismic safety for hydraulic fracturing activities or the underground injection of fluid wastes.
In addition, in light of concerns about seismic activity potentially being triggered by the injection of produced waters into underground wells, regulators in the states in which we operate have adopted additional requirements related to seismic safety for hydraulic 31 fracturing activities or the underground injection of fluid wastes.
The EP Act of 2005 provided FERC with the power to assess civil penalties of up to $1,000,000 per day for violations of the NGA and increased FERC’s civil penalty authority under the NGPA from $5,000 per violation per day to $1,000,000 per violation per day, with such penalties adjusted regularly for inflation.
The EP Act of 2005 provided FERC with the power to assess civil penalties of up to $1,000,000 per day for violations of the NGA and increased FERC’s civil penalty authority under the NGPA from $5,000 per violation per day to $1,000,000 per 27 violation per day, with such penalties adjusted regularly for inflation.
We provide equal opportunity for all candidates, employees, and consultants regardless of race, religion, gender, sexual orientation, age, ethnic or national origin, social origin, disability, family status, or any other protected status and personal characteristics for all aspects of employment.
We provide equal 25 opportunity for all candidates, employees, and consultants regardless of race, religion, gender, sexual orientation, age, ethnic or national origin, social origin, disability, family status, or any other protected status and personal characteristics for all aspects of employment.
To foster the health and well-being of our employees and their families, all full-time employees are offered access to financial, health, and wellness programs, including: a 401(k) plan with company match, medical, dental, and vision insurance, income protection and disability coverage, paid time off, fitness reimbursement, and various quality of life tools and resources included within our Employee Assistance Program.
To foster the health and well-being of our employees and their families, all full-time employees are offered access to financial, health, and wellness programs, including: a 401(k) plan with company match, medical, dental, and vision insurance, income protection and disability coverage, paid time off, parental leave, fitness reimbursement, and various quality of life tools and resources included within our Employee Assistance Program.
However, it is difficult to estimate the potential impact on our business from rules and regulations adopted by states in which we operate, including rules and regulations adopted by the Colorado Oil and Gas Conservation Commission (“COGCC”) in November 2020 pursuant to Colorado Senate Bill 19-181, discussed herein, which impose a number of new and amended requirements on our operations.
However, it is difficult to estimate the potential impact on our business from rules and regulations adopted by states in which we operate, including rules and regulations adopted by the Colorado Oil and Gas Conservation Commission (“COGCC”) in November 2020 pursuant to Colorado Senate Bill 19-181, discussed herein, which impose a number of requirements on our operations.
In October 2023, the AQCC adopted the Greenhouse Gas Emissions and Energy Management for Manufacturing Phase 2 rule, which requires 18 of Colorado’s highest emitting manufacturers in the industrial sector (which includes energy use in the oil and gas industry) to collectively reduce their GHG levels by 20% by 2030, as compared to 2015 levels.
In October 2023, the AQCC adopted the Greenhouse Gas Emissions and Energy Management for Manufacturing Phase 2 (“GEMM 2”) rule, which requires 18 of Colorado’s highest emitting manufacturers in the industrial sector (which includes energy use in the oil and gas industry) to collectively reduce their GHG levels by 20% by 2030, as compared to 2015 levels.
Environmental groups will likely continue to press the issue at the federal and state levels. In 2020, the Colorado Department of Public Health & Environment (“CDPHE”) proposed new rules governing Technologically Enhanced Naturally Occurring Radioactive Material (“TENORM”) waste, which were adopted in November 2020 and became enforceable in July 2022.
Environmental groups will likely continue to press the issue at the federal and state levels. In 2020, the Colorado Department of Public Health & Environment (“CDPHE”) proposed new rules governing Technologically Enhanced Naturally Occurring Radioactive Material (“TENORM”) waste, which were adopted in November 2020 and became effective in July 2022.
In September 2023, EPA and the Corps published a direct-to- final rule redefining WOTUS to amend the January 2023 rule and align with the decision in Sackett.
In September 2023, EPA and the Corps published a direct-to- final rule redefining WOTUS to align the January 2023 rule with the decision in Sackett.
We are committed to ensuring the composition of the Board reflects an overall balance of diversity of experiences, skills, attributes, and viewpoints. Our board consists of 33% women, and 22% are members of a minority group, as defined by the U.S. Equal Employment Opportunity Commission, as of December 31, 2023.
We are committed to ensuring the composition of the Board reflects an overall balance of diversity of experiences, skills, attributes, and viewpoints. Our board consists of 33% women, and 22% are members of a minority group, as defined by the U.S. Equal Employment Opportunity Commission, as of December 31, 2024.
Regulations implementing the GHG inventory requirements of these statutes took effect on July 15, 2020. Additionally, on September 30, 2020, the Colorado Energy Office and Colorado Department of Public Health and Environment finalized a Greenhouse Gas Pollution Reduction Roadmap in January 2021.
Regulations implementing the GHG inventory requirements of these statutes took effect on July 15, 2020. Additionally, in January 2021, the Colorado Energy Office and Colorado Department of Public Health and Environment finalized a Greenhouse Gas Pollution Reduction Roadmap.
The states in which we operate also regulate drilling and operating activities by requiring, among other things, permits for new pad locations, the drilling of wells, best management practices and/or conditions of approval for operating wells, maintaining bonding requirements in order to drill or operate wells, regulating the location of wells, the method of drilling and casing wells, the surface use and restoration of properties upon which wells are drilled, and the plugging and abandonment of 24 Table of Contents wells.
The states in which we operate also regulate drilling and operating activities by requiring, among other things, permits for new pad locations, the drilling of wells, best management practices and/or conditions of approval for operating wells, maintaining bonding requirements in order to drill or operate wells, regulating the location of wells, the method of drilling and casing wells, the surface use and restoration of properties upon which wells are drilled, and the plugging and abandonment of wells.
Any enforcement actions or requirements of additional studies or investigations by governmental authorities where we operate could increase our operating costs and cause delays or interruptions to our operations. 28 Table of Contents The federal Safe Drinking Water Act (“SDWA”) and comparable state statutes may restrict the disposal, treatment, or release of water produced or used during oil and gas development.
Any enforcement actions or requirements of additional studies or investigations by governmental authorities where we operate could increase our operating costs and cause delays or interruptions to our operations. The federal Safe Drinking Water Act (“SDWA”) and comparable state statutes may restrict the disposal, treatment, or release of water produced or used during oil and gas development.
In November 2021, PHMSA issued its final rule extending reporting requirements to all onshore gas gathering operators and applying a set of minimum safety requirements to certain onshore gas gathering pipelines with large diameters and high operating pressures. 31 Table of Contents In Colorado, on March 17, 2021, the Public Utilities Commission adopted Regulation 11 rules Regulating Pipeline Operators and Gas Pipeline Safety.
In November 2021, PHMSA issued its final rule extending reporting requirements to all onshore gas gathering operators and applying a set of minimum safety requirements to certain onshore gas gathering pipelines with large diameters and high operating pressures. In Colorado, on March 17, 2021, the Public Utilities Commission adopted Regulation 11 rules Regulating Pipeline Operators and Gas Pipeline Safety.
Any significant inaccuracies in these interpretations or assumptions could materially affect the estimated quantities and present value of reserves shown in this Annual Report on Form 10-K. See “ Item 1.
Any significant inaccuracies in these interpretations or assumptions could materially affect the estimated quantities and present value of reserves shown in this Annual Report on Form 10-K. See “
The anti-manipulation rule and enhanced civil penalty authority reflect an expansion of FERC’s NGA enforcement authority. Our sales of natural gas are also subject to requirements under the Commodity Exchange Act (“CEA”), and regulations promulgated thereunder by the 25 Table of Contents Commodity Futures Trading Commission (“CFTC”).
The anti-manipulation rule and enhanced civil penalty authority reflect an expansion of FERC’s NGA enforcement authority. Our sales of natural gas are also subject to requirements under the Commodity Exchange Act (“CEA”), and regulations promulgated thereunder by the Commodity Futures Trading Commission (“CFTC”).
Cumulatively, these laws and regulations may impact our operations. 26 Table of Contents The following is a summary of the more significant environmental and health and safety laws and regulations to which we are subject and for which compliance may have a material adverse impact on our capital expenditures, results of operations, or financial position.
Cumulatively, these laws and regulations may impact our operations. The following is a summary of the more significant environmental and health and safety laws and regulations to which we are subject and for which compliance may have a material adverse impact on our capital expenditures, results of operations, or financial position.
Each of the service companies we use fracture stimulate a multitude of wells for the industry each year. 29 Table of Contents We periodically review our plans and policies regarding oil and gas operations, including hydraulic fracturing, in order to minimize any potential environmental impact.
Each of the service companies we use fracture stimulate a multitude of wells for the industry each year. We periodically review our plans and policies regarding oil and gas operations, including hydraulic fracturing, in order to minimize any potential environmental impact.
These factors include, but are not limited to, the following: • worldwide, regional, and local economic conditions impacting the global supply and demand for crude oil and natural gas; • the actions from members of the Organization of Petroleum Exporting Countries and other crude oil producing nations; • the price and quantity of imports of foreign crude oil and natural gas; • political conditions in or affecting other crude oil and natural gas producing countries, including the current conflicts in the Middle East (including the current events related to the Israel-Palestine conflict) and involving Russia and Ukraine and conditions in South America; • the level of domestic and global crude oil and natural gas exploration and production; • the level of domestic and global crude oil and natural gas inventories; • localized supply and demand fundamentals and transportation availability; • weather conditions and natural disasters, including the physical effects of climate change; • local, domestic, and foreign governmental regulations, including regulations addressing climate change; • speculation as to the future price of crude oil and the speculative trading of crude oil and natural gas futures contracts; • the price and availability of competitors’ supplies of crude oil and natural gas; • technological advances affecting energy consumption; • variability in subsurface reservoir characteristics, particularly in areas with immature development history, even within areas in close proximity within the same basin or field; • the availability of pipeline capacity and infrastructure; and • the price and availability of alternative fuels.
These factors include, but are not limited to, the following: • worldwide, regional, and local economic conditions impacting the global supply and demand for crude oil and natural gas; 38 • the actions from members of the Organization of Petroleum Exporting Countries and other crude oil producing nations; • the price and quantity of imports of foreign crude oil and natural gas; • political conditions in or affecting other crude oil and natural gas producing countries, including the current conflicts in the Middle East and involving Russia and Ukraine and conditions in South America; • the level of domestic and global crude oil and natural gas exploration and production; • the level of domestic and global crude oil and natural gas inventories; • localized supply and demand fundamentals and transportation availability; • weather conditions and natural disasters, including the physical effects of climate change; • local, domestic, and foreign governmental regulations and policies, including regulations addressing climate change and trade policies, including tariffs; • speculation as to the future price of crude oil and the speculative trading of crude oil and natural gas futures contracts; • the price and availability of competitors’ supplies of crude oil and natural gas; • technological advances affecting energy consumption; • variability in subsurface reservoir characteristics, particularly in areas with immature development history, even within areas in close proximity within the same basin or field; • the availability of pipeline capacity and infrastructure; and • the price and availability of alternative fuels.
The state of Colorado’s Denver Metro and North Front Range (“DM/NFR”) air quality control region has been unable to attain the 2008 and 2015 ozone NAAQS since their adoption, and its existing non-attainment status for the 2008 NAAQS was reclassified from “serious” to “severe” in 2022 due to violations at area monitors during the 2020 ozone season.
The state of Colorado’s Denver Metro and North Front Range (“DM/NFR”) air quality control region has been unable to attain the 2008 and 2015 NAAQS since their 29 adoption, and its existing nonattainment status for the 2008 NAAQS was reclassified from “serious” to “severe” in 2022 due to violations at area monitors during the 2020 ozone season.
Among other things, the November 2022 supplemental proposed rule removes an emissions monitoring exemption for small wellhead-only sites and creates a new third-party monitoring program to flag large emissions events, referred to in the proposed rule as “super emitters.” The EPA announced a final rule on December 2, 2023, which, among other things, requires the phase out of routine flaring of natural gas from new oil wells and routine leak monitoring at all well sites and compressor stations.
Among other things, the November 2022 supplemental proposed rule sought to remove an emissions monitoring exemption for small wellhead-only sites and creates a new third-party monitoring program to flag large emissions events, referred to in the proposed rule as “super emitters.” The EPA announced a final rule in December 2023, which, among other things, requires the phase out of routine flaring of natural gas from new oil wells and routine leak monitoring at all well sites and compressor stations.
Our estimated proved reserves and our ultimate number of prospective well development locations are based on many assumptions that may turn out to be inaccurate. Any significant inaccuracies in these reserve estimates or underlying assumptions will materially affect the quantities and present value of our reserves.
Risks Related to Our Reserves, Leases, and Drilling Locations Our estimated proved reserves and our ultimate number of prospective well development locations are based on many assumptions that may turn out to be inaccurate. Any significant inaccuracies in these reserve estimates or underlying assumptions will materially affect the quantities and present value of our reserves.
In January 2021, the Department of the Interior finalized a rule limiting application of the MBTA; however, the Department of the Interior revoked the rule in October 2021 and issued an advance notice of proposed rulemaking seeking comment on the Department's plan to develop regulations that authorize incidental taking under certain prescribed conditions. In June 2023, the U.S.
In January 2021, the Department of the Interior finalized a rule limiting application of the MBTA; however, the Department of the Interior revoked the rule in October 2021 and issued an advance notice of proposed rulemaking seeking comment on the Department's plan to develop regulations that authorize incidental taking under certain prescribed conditions.
With the approval of the EPA, the individual states can administer some or all of the provisions of 30 Table of Contents RCRA, and some states have adopted their own, more stringent hazardous waste requirements, while all states regulate solid waste.
With the approval of the EPA, the individual states can administer some or all of the provisions of RCRA, and some states have adopted their own, more stringent hazardous waste requirements, while all states regulate solid waste.
We have also posted to our website our Audit Committee Charter, Compensation Committee Charter, Nominating and Corporate Governance Committee Charter, ESG Committee Charter, Corporate Governance Guidelines, Code of Business Conduct and Ethics, and Insider Trading Policy, in addition to all pertinent company contact information. 35 Table of Contents Item 1A. Risk Factors. Our business involves a high degree of risk.
We have also posted to our website our Audit Committee Charter, Compensation Committee Charter, Nominating and Corporate Governance Committee Charter, Sustainability Committee Charter, Corporate Governance Guidelines, Code of Business Conduct and Ethics, and Insider Trading Policy, in addition to all pertinent company contact information. Item 1A. Risk Factors. Our business involves a high degree of risk.
Additionally, the DM/NFR’s non-attainment boundary for the 2015 NAAQS was successfully challenged by environmental groups and local governments seeking to expand the boundary to include all of northern Weld County in the case of Clean Wisconsin v. EPA , No. 18-1203, in which the D.C. Circuit remanded the boundary determination to the EPA for further support or re-designation.
Additionally, the DM/NFR’s nonattainment boundary for the 2015 NAAQS was successfully challenged by environmental groups and local governments seeking to expand the boundary to include all of northern Weld County in the case of Clean Wisconsin v. EPA , No. 18-1203, in which the D.C. Circuit remanded the boundary determination to the EPA for further support or redesignation.
On May 30, 2019, Colorado also passed GHG inventory legislation and climate action legislation. House Bill 19-1261 concerns the reduction of greenhouse gas pollution and established statewide greenhouse gas pollution reduction goals. Senate Bill 19-096 concerns the collection of greenhouse gas emissions data to facilitate measures to cost-effectively meet the state’s GHG emissions reduction goals established in HB 19-1261.
In May 2019, Colorado passed GHG inventory legislation and climate action legislation. House Bill 19-1261 concerns the reduction of GHG pollution and established statewide GHG pollution reduction goals. Senate Bill 19-096 concerns the collection of GHG emissions data to facilitate measures to cost-effectively meet the state’s GHG emissions reduction goals established in HB 19-1261.
Regulation of transportation of oil Our sales of crude oil are affected by the availability, terms, and cost of transportation. Interstate transportation of oil by pipeline is regulated by FERC pursuant to the Interstate Commerce Act (“ICA”), the Energy Policy Act of 1992, and the rules and regulations promulgated under those laws.
Regulation of transportation of oil Our sales of crude oil are affected by the availability, terms, and cost of transportation. Interstate transportation of oil by pipeline is regulated by the Federal Energy Regulatory Commission (“FERC”) pursuant to the Interstate Commerce Act (“ICA”), the Energy Policy Act of 1992, and the rules and regulations promulgated under those laws.
We are monitoring GHG emissions from our operations in accordance with the EPA’s GHG emissions reporting rule and Colorado’s GHG emissions inventory and reporting rules more recently adopted. In August 2022, President Biden signed into law the Inflation Reduction Act of 2022.
We are monitoring GHG emissions from our operations in accordance with the EPA’s GHG emissions reporting rule and Colorado’s GHG emissions inventory and reporting rules more recently adopted. In August 2022, the Inflation Reduction Act of 2022 (the “Inflation Reduction Act”) was signed into law.
Employee health and safety We are subject to a number of federal and state laws and regulations, including the federal Occupational Safety and Health Act (“OSHA”), and comparable state statutes, the purpose of which are to protect the health and safety of workers.
Employee health and safety We are subject to a number of federal and state laws and regulations, including OSHA, and comparable state statutes, the purpose of which are to protect the health and safety of workers.
In December 2023, the New Mexico Environment Department proposed new regulations that would require the reuse of produced water generated by the oil and gas industry, so long as there is no discharge to surface or groundwater.
In November 2023, the New Mexico Environment Department proposed new regulations that would require the reuse of produced water generated by the oil and gas industry, so long as there is no discharge to surface or groundwater. The New Mexico Environment Department is expected to finalize the rule in 2025.
Declines in commodity prices may have the following effects on our business: • reduction of our revenues, profit margins, operating income, and cash flows; 38 Table of Contents • reduction in the amount of crude oil, natural gas, and NGL that we can produce economically, and reduction in our liquidity and inability to pay our liabilities as they come due; • certain properties in our portfolio becoming economically unviable; • delay or postponement of some of our capital projects; • significant reductions in future capital programs, resulting in a reduced ability to develop our reserves; • limitations on our financial condition, liquidity, and/or ability to finance planned capital expenditures and operations; • reduction to the borrowing base under our Credit Facility or limitations in our access to sources of capital, such as equity or debt; • declines in our stock price; • reduction in industry demand for crude oil; • reduction in storage availability for crude oil; • reduction in pipeline and processing industry demand and capacity for natural gas; • reduction in the ability of our vendors, suppliers, and customers to continue operations due to the prevailing adverse market conditions; and • asset impairment charges resulting from reductions in the carrying values of our crude oil and natural gas properties at the date of assessment.
Declines in commodity prices may have the following effects on our business: • reduction of our revenues, profit margins, operating income, and cash flows; • reduction in the amount of crude oil, natural gas, and NGL that we can produce economically, and reduction in our liquidity and inability to pay our liabilities as they come due; • certain properties in our portfolio becoming economically unviable; • delay or postponement of some of our capital projects; • significant reductions in future capital programs, resulting in a reduced ability to develop our reserves; • limitations on our financial condition, liquidity, and/or ability to finance planned capital expenditures and operations; • reduction to the borrowing base under our Credit Facility or limitations in our access to sources of capital, such as equity or debt; • declines in our stock price; • reduction in industry demand for crude oil; • reduction in storage availability for crude oil; • reduction in pipeline and processing industry demand and capacity for natural gas; • reduction in the ability of our vendors, suppliers, and customers to continue operations due to the prevailing adverse market conditions; and • asset impairment charges resulting from reductions in the carrying values of our crude oil and natural gas properties at the date of assessment. 39 If commodity prices decrease to a level such that our future undiscounted cash flows from our properties are less than their carrying value for a significant period of time, we may be required to take write-downs of the carrying values of our properties.
In response, the EPA chose to re-designate the boundary for the 2015 ozone NAAQS to include all of Weld County, which action became effective on December 30, 2021. Weld County challenged the EPA’s action upon remand in the D.C. Circuit, and the D.C. Circuit denied Weld County’s petition for review in June 2023.
In response, the EPA chose to redesignate the boundary for the 2015 NAAQS to include all of Weld County, which action became effective on December 30, 2021. Weld County challenged the EPA’s action upon remand in the D.C. Circuit, and the D.C. Circuit denied Weld County’s petition for review in June 2023. Bd. of County Comm. of Weld County v.
Obtaining required air permits can significantly delay the development of certain crude oil and natural gas projects. Over the next several years, we may be required to incur certain expenditures for air pollution control equipment or other air emissions-related issues. Federal Air Regulation In June 2016, the U.S.
Obtaining required air permits can significantly delay the development of certain crude oil and natural gas projects. Over the next several years, we may be required to incur certain expenditures for air pollution control equipment or other air emissions-related issues.
Depending on how these and any other new rules are applied and enforced, they could substantially increase in well costs for our Colorado operations, impact our ability to operate and extend the time necessary to obtain drilling permits, which would create substantial uncertainty about future development plans in Colorado.
These and any other new rules could substantially 32 increase well costs for our Colorado operations, impact our ability to operate and extend the time necessary to obtain drilling permits, which would create substantial uncertainty about future development plans in Colorado.
The new NWPs became effective in March 2021. 33 Table of Contents Among other things, NWP 12 was broken up into three separate parts, with the new NWP 12 being limited solely to construction and maintenance of oil and gas pipelines, with other utility-related structures covered by two new NWPs.
Among other things, NWP 12 was broken up into three separate parts, with the new NWP 12 being limited solely to construction and maintenance of oil and gas pipelines, with other utility-related structures covered by two new NWPs.
Approximately 23% of our total workforce are women, and 17% are members of a minority group, as of December 31, 2023. As of the same date, 32% of our executives (as defined as persons at the level of Vice President and higher) are women, and 18% are members of a minority group.
Approximately 27% of our total workforce are women, and 20% are members of a minority group, as of December 31, 2024. As of the same date, 27% of our executives (as defined as persons at the level of Vice President and higher) are women, and 23% are members of a minority group.
As of February 23, 2024, the daily NYMEX WTI crude oil spot price and NYMEX HH natural gas spot price was $76.49 per Bbl and $1.60 per MMBtu, respectively. The prices we receive for our production and the levels of our production, depend on numerous factors beyond our control.
As of February 21, 2025, the daily NYMEX WTI crude oil spot price and NYMEX HH natural gas spot price was $70.40 per Bbl and $4.23 per MMBtu, respectively. The prices we receive for our production and the levels of our production, depend on numerous factors beyond our control.
In July 2023, CEQ issued a proposed rule for the Phase II rulemaking. The proposed Phase II rule restores certain mitigation language from the pre-2020 version of the NEPA regulations, proposes further revisions to ensure the NEPA process “provides for efficient and effective environmental reviews,” and meets environmental, environmental justice, and climate change objectives.
In May 2024, CEQ finalized the Phase II rulemaking, which generally restores certain mitigation language from the pre-2020 version of the NEPA regulations, proposes further revisions to ensure the NEPA process “provides for efficient and effective environmental reviews,” and meets environmental, environmental justice, and climate change objectives.
Environmental, Health, and Safety Regulation Our crude oil and natural gas exploration and production operations are subject to numerous stringent federal, state, and local laws and regulations governing public and occupational safety and health, the discharge of hazardous materials into the environment, or otherwise relating to protection of the environment or natural resources, noncompliance with which can result in substantial administrative, civil, and criminal penalties and other sanctions, including suspension or cessation of operations.
The Dodd-Frank Act provides for a potential exemption from these clearing and cash collateral requirements for commercial end-users. 28 Environmental, Health, and Safety Regulation Our crude oil and natural gas exploration and production operations are subject to numerous stringent federal, state, and local laws and regulations governing public and occupational safety and health, the discharge of hazardous materials into the environment, or otherwise relating to protection of the environment or natural resources, noncompliance with which can result in substantial administrative, civil, and criminal penalties and other sanctions, including suspension or cessation of operations.
Environmental Protection Agency (the “EPA”) finalized additional New Source Performance Standards (“NSPS”) rules, known as Subpart OOOOa, focused on achieving additional methane and volatile organic compound reductions from new and modified oil and natural gas production and natural gas processing and transmission facilities.
Federal Air Regulation In June 2016, the EPA finalized additional New Source Performance Standards (“NSPS”) rules, known as Subpart OOOOa, focused on achieving additional methane and volatile organic compound reductions from new and modified oil and natural gas production and natural gas processing and transmission facilities.
The final rule gives states, along with federal tribes that wish to regulate existing sources, two years to develop and submit their plans for reducing methane from existing sources. The final emissions guidelines under Subpart OOOOc provide three years from the plan submission deadline for existing sources to comply.
The final rule gives states, along with federal tribes that wish to regulate existing sources, until March 2026 to develop and submit their plans for reducing methane from existing sources. The final emissions guidelines under Subpart OOOOc provides until 2029 for existing sources to comply.
Water discharges The Federal Water Pollution Control Act or the Clean Water Act (“CWA”) and analogous state laws impose restrictions and controls regarding the discharge of pollutants into certain surface waters of the U.S., including spills and leaks of hydrocarbons and produced water.
The final rule is expected following a review of GEMM 2 by the end of 2025. 35 Water discharges The Federal Water Pollution Control Act or the Clean Water Act (“CWA”) and analogous state laws impose restrictions and controls regarding the discharge of pollutants into certain surface waters of the U.S., including spills and leaks of hydrocarbons and produced water.
While the Permian Basin in Texas and New Mexico has not been designated as being in nonattainment with federal ozone standards, the EPA’s 2023 proposal to designate the Permian Basin as being in nonattainment remains pending. 27 Table of Contents State Air Regulation The Colorado Department of Public Health and Environment’s Air Quality Control Commission (“AQCC”) has adopted air quality regulations that impose stringent new requirements to control emissions from both existing and new or modified oil and gas facilities in Colorado, including emissions control, monitoring, recordkeeping, and reporting requirements, as well as a Leak Detection and Repair (“LDAR”) program for well production facilities and compressor stations.
State Air Regulation The Colorado Department of Public Health and Environment’s Air Quality Control Commission (“AQCC”) has adopted air quality regulations that impose stringent new requirements to control emissions from both existing and new or modified oil and gas facilities in Colorado, including emissions control, monitoring, recordkeeping, and reporting requirements, as well as a Leak Detection and Repair (“LDAR”) program for well production facilities and compressor stations.
For example, in October 2023, the AQCC adopted the Greenhouse Gas Emissions and Energy Management for Manufacturing Phase 2 rule, which requires 18 of Colorado’s highest emitting manufacturers in the industrial sector (which includes energy use in the oil and gas industry) to collectively reduce their GHG levels by 20% by 2030, as compared to 2015 levels.
For example, in October 2023, the AQCC adopted the Greenhouse Gas Emissions and Energy Management for Manufacturing Phase 2 rule, which requires 18 of Colorado’s highest emitting manufacturers in the industrial sector (which includes energy use in the oil and gas industry) to collectively reduce their GHG levels by 20% by 2030, as compared to 2015 levels. 30 In 2021 the New Mexico Energy, Minerals and Natural Resources Department enacted a rule, which requires oil and gas operators to capture 98% of their produced natural gas by December 31, 2026, and prohibits routine venting and flaring.
In particular, crude oil and natural gas production and related operations are, or have been, subject to price controls, taxes, and numerous other laws and regulations.
Regulation of the Crude Oil and Natural Gas Industry Our operations are substantially affected by federal, state, and local laws and regulations. In particular, crude oil and natural gas production and related operations are, or have been, subject to price controls, taxes, and numerous other laws and regulations.
The new rule will require oil and gas operators to calculate the intensity of their emissions (tying the level of emissions to the amount of oil and gas produced), directly measure emissions, and regularly report findings to the state. The rule is expected to take effect in 2025.
The new rule will require oil and gas operators to calculate the intensity of their emissions (tying the level of emissions to the amount of oil and gas produced), directly measure emissions, and regularly report findings to the state. The intensity targets within the rule are phased in and begin decreasing over five years, starting in 2025.
During times of suppressed crude oil prices, we have historically experienced significant decreases in crude oil revenues and recorded unproved property asset impairment charges.
Further, crude oil prices and natural gas prices do not necessarily fluctuate in direct relation to each other. During times of suppressed crude oil prices, we have historically experienced significant decreases in crude oil revenues and recorded unproved property asset impairment charges.
Supreme Court significantly narrowed the Montana court’s injunction to cover only the challenged XL Pipeline in July 2020. In January 2021, the Corps issued proposals to revise and reissue all 52 current NWPs, including No. 12, to, among other things, lessen the burden on the energy industry and address the flaws alleged in the Montana lawsuit.
In January 2021, the Corps issued proposals to revise and reissue all 52 current NWPs, including No. 12, to, among other things, lessen the burden on the energy industry and address the flaws alleged in the Montana lawsuit. The new NWPs became effective in March 2021.
The fee imposed under the Methane Emissions and Waste Reduction Incentive Program for 2024 would be $900 per ton emitted over annual methane emissions thresholds, and will increase to $1,200 in 2025, and $1,500 in 2026.
The fee imposed under the Methane Emissions and Waste Reduction Incentive Program for 2024 is $900 per ton emitted over annual methane emissions thresholds, and increases to $1,200 in 2025, and $1,500 in 2026. In January 2025, industry associations challenged the Waste Emissions Charge rule in the D.C. Circuit.
During the year ended December 31, 2023, the daily NYMEX WTI crude oil spot price ranged from a high of $93.67 per Bbl to a low of $66.61 per Bbl, and the NYMEX HH natural gas spot price ranged from a high of $3.78 per MMBtu to a low of $1.74 per MMBtu.
During the year ended December 31, 2024, the daily NYMEX WTI crude oil spot price ranged from a high of $86.91 per Bbl to a low of $65.75 per Bbl, and the NYMEX HH natural gas spot price ranged from a high of $13.20 per MMBtu to a low of $1.21 per MMBtu.
Since its formal launch at COP26, over 100 countries representing almost 70% of global GDP have signed. At the 27th Conference of Parties (“COP27”), President Biden agreed, in conjunction with the European Union and a number of other partner countries, to develop standards for monitoring and reporting methane emissions to help create a market for low methane-intensity natural gas.
At the 27th Conference of the Parties, the U.S. agreed, in conjunction with the European Union and a number of other partner countries, to develop standards for monitoring and reporting methane emissions to help create a market for low methane-intensity natural gas.
In May 2020, a federal court in Montana enjoined the use of nationwide permit (“NWP”) 12 to construct new oil and gas-related pipelines, on the basis that the Corps had not properly consulted with the U.S. Fish and Wildlife Service when that permit was renewed in 2017 but the U.S.
Accordingly, future implementation and enforcement of these rules and policies is uncertain at this time. In May 2020, a federal court in Montana enjoined the use of nationwide permit (“NWP”) 12 to construct new oil and gas-related pipelines, on the basis that the Corps had not properly consulted with the U.S.
The Dodd-Frank Act subjects swap dealers and major swap participants to capital and margin requirements and requires many derivative transactions to be cleared on exchanges. The Dodd-Frank Act provides for a potential exemption from these clearing and cash collateral requirements for commercial end-users.
The Dodd-Frank Act subjects swap dealers and major swap participants to capital and margin requirements and requires many derivative transactions to be cleared on exchanges.
Among other things, the proposed rule expands the emissions events that are subject to reporting requirements to include “other large release events” and applies reporting requirements to certain new sources and sectors.
To implement the program, in May 2024, the EPA finalized revisions to the Greenhouse Gas Reporting Program for petroleum and natural gas facilities. Among other things, the new rule expands the emissions events that are subject to reporting requirements to include “other large release events” and applies reporting requirements to certain new sources and sectors.
The EPA also published a study of the impact of hydraulic fracturing on drinking water resources, which concluded that drinking water resources can be affected by hydraulic fracturing under specific circumstances. The results of this study could result in additional regulations, which could lead to operational burdens similar to those described above.
The EPA also published a study of the impact of hydraulic fracturing on drinking water resources, which concluded that drinking water resources can be affected by hydraulic fracturing under specific circumstances.
Most recently, at the 28th Conference of the Parties (“COP28”), President Biden announced the EPA’s final standards to reduce methane emissions from existing oil and gas sources. Additionally, at COP28, member countries entered into an agreement that calls for actions towards achieving, at a global scale, a tripling of renewable energy capacity and doubling energy efficiency improvements by 2030.
At the 28th Conference of the Parties, member countries entered into an agreement that calls for actions towards achieving, at a global scale, a tripling of renewable energy capacity and doubling energy efficiency improvements by 2030.
Item 1A. Risk Factors ” of this report for additional discussion. Insurance Matters As is common in the crude oil and natural gas industry, we will not insure fully against all risks associated with our business, either because such insurance is not available or customary, or because premium costs are considered cost-prohibitive.
Insurance Matters As is common in the crude oil and natural gas industry, we will not insure fully against all risks associated with our business, either because such insurance is not available or customary, or because premium costs are considered cost prohibitive. 24 A loss not fully covered by insurance could have a material adverse effect on our financial position, results of operations, or cash flows.
Summary of the Risk Factors We Face : • Declines in crude oil, natural gas, and NGL prices will adversely affect our business, financial condition, or results of operations, and our ability to meet our capital expenditure obligations or targets and financial commitments. • Our production is not fully hedged, and we may hedge a lower percentage of our production than we have in the past.
Risks Related to Commodity Prices Declines in crude oil, natural gas, and NGL prices will adversely affect our business, financial condition or results of operations, and our ability to meet our capital expenditure obligations or targets and financial commitments.
Our employees play a critical role in the achievement of our short-term and long-term business goals. Consequently, we are committed to attracting, retaining, and developing highly motivated and qualified employees who share our core values of sustainability, safety, innovation, integrity, and community. All employees are responsible for upholding Company-wide standards and values.
Consequently, we are committed to attracting, retaining, and developing highly motivated and qualified employees who share our core values of sustainability, safety, innovation, integrity, and community. All employees are responsible for upholding Company-wide standards and values. We have policies designed to promote ethical conduct and integrity that employees are required to review on an annual basis.
On November 30, 2022, the BLM also issued a proposed rule to reduce the waste of natural gas from venting, flaring and leaks during oil and gas production activities on Federal and Indian leases.
In April 2024, the Bureau of Land Management (“BLM”) finalized a rule to reduce the waste of natural gas from venting, flaring and leaks during oil and gas production activities on federal and Indian leases, which became effective in June 2024.
The comment period ended on May 27, 2022 and the review remains pending. Any further changes to NWP 12 could have an impact on our business. Endangered Species Act and Migratory Bird Treaty Act The federal Endangered Species Act (“ESA”) restricts activities that may affect endangered and threatened species or their habitats. In August 2019, the U.S.
Any further changes to NWP 12 could have an impact on our business. 36 Endangered Species Act and Migratory Bird Treaty Act The federal Endangered Species Act (“ESA”) was established to protect endangered and threatened species and their habitats.
Certain of our employees have highly specialized skills and subject-matter expertise in their respective fields. 22 Table of Contents Health and Safety We are committed to protecting the safety of our employees, our contractors, and the communities in which we operate. Safety is embedded in everything we do and is prioritized in each decision made by management, employees, and contractors.
Certain of our employees have highly specialized skills and subject-matter expertise in their respective fields. Health and Safety At Civitas, safety is a foundational value. The health and safety of our employees, contractors, suppliers, and the communities in which we operate is paramount.
Our team of diverse and talented employees possess a vast array of skills including engineering, geology, research and development, midstream operations, production, logistics and administrative support, accounting, information technology, legal, policy, human resources, and finance.
Employees are consistently provided training opportunities to develop skills in leadership, safety, and technical acumen, which help strengthen our efforts in conducting business with high ethical standards. Our team of talented employees possess a vast array of skills including engineering, geoscience, midstream operations, production, safety, land, logistics and administrative support, accounting, information technology, legal, policy, human resources, and finance.
Fish and Wildlife Service issued three proposed rules governing critical habitat designation and expanding protection options for species listed as threatened pursuant to the ESA. The comment periods for these rules ended in August 2023, and final rules are expected by April 2024.
However, the Department of the Interior has not yet issued proposed rulemaking regulations. As a result, future amendments to the MBTA are uncertain. In April 2024, the FWS issued three final rules governing critical habitat designation and expanding protection options for species listed as threatened pursuant to the ESA.
The Inflation Reduction Act of 2022 also provides significant funding and incentives for research and development of low-carbon energy production methods, carbon capture, and other programs directed at addressing climate change. Additionally, on March 21, 2022, the SEC issued a proposed rule regarding the enhancement and standardization of mandatory climate-related disclosures for investors.
The Inflation Reduction Act also provides significant funding and incentives for research and development of low-carbon energy production methods, carbon capture, and other programs directed at addressing climate change. However, in January 2025, President Trump issued executive orders directing an immediate pause on the disbursement of funds appropriated through the Inflation Reduction Act.
A loss not fully covered by insurance could have a material adverse effect on our financial position, results of operations, or cash flows. Human Capital As of December 31, 2023, we had 516 full-time employees. We are not party to any collective bargaining agreements and have not experienced any strikes or work stoppages.
Human Capital As of December 31, 2024, we had 655 full-time employees. We are not party to any collective bargaining agreements and have not experienced any strikes or work stoppages. Our employees play a critical role in the achievement of our short-term and long-term business goals.
Information contained in our Corporate Sustainability Report is not incorporated by reference into, and does not constitute a part of, this Annual Report on Form 10-K. 23 Table of Contents Offices As of December 31, 2023, we leased office space in Denver, Colorado at 555 17 th Street where our principal offices are located.
Offices As of December 31, 2024, we leased office space in Denver, Colorado at 555 17 th Street where our principal offices are located. Additionally, we own and lease various corporate and field office space in Colorado, New Mexico, and Texas.
The CEQ’s proposed changes could result in increased NEPA review timelines for projects involving agency action regarding federal lands, federal money, or federal permits or approvals. 34 Table of Contents Oil Pollution Act The Oil Pollution Act of 1990 (“OPA”) establishes strict liability for owners and operators of facilities that release oil into waters of the U.S.
The potential impact of further changes to the NEPA regulations and statutory text therefore remains uncertain and could have an effect on our business and operations. 37 Oil Pollution Act The Oil Pollution Act of 1990 (“OPA”) establishes strict liability for owners and operators of facilities that release oil into waters of the U.S.
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We have policies designed to promote ethical conduct and integrity that employees are required to review on an annual basis. Employees are consistently provided training opportunities to develop skills in leadership, safety, and technical acumen, which help strengthen our efforts in conducting business with high ethical standards.
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Item 1A. Risk Factors ” of this report for additional discussion.
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A commonly used measure of an organization’s safety performance is total recordable incident rate (“TRIR”), which represents the number of injuries requiring medical treatment per 100 full-time workers during a one-year period. We monitor this performance measure and communicate it broadly across the company as a means to evaluate safety performance.
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We are committed to maintaining a safe and healthy work environment through rigorous safety protocols, continuous training, and strict adherence to regulatory standards. This commitment has led to a Total Recordable Incident Rate (“TRIR”) of 0.25 in 2024, which is below the industry average determined by the U.S. Bureau of Labor Statistics.
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We are committed to maintaining a TRIR below 0.25 for both employees and contractors, a target far below industry average as reported by the Bureau of Labor Statistics for our industry. During 2023, we achieved a TRIR of 0.23.
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This outstanding performance underscores our dedication to safety and our proactive approach to risk management. Our operations seek to comply with all relevant federal and state health and safety regulations, including the federal Occupational Safety and Health Act (“OSHA”) and comparable state laws. We adhere to the OSHA hazard communication standard and the U.S.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeVigil served as our Director of Information Technology from April 2021 through December 2023. Mr. Vigil has a Bachelor of Science in Business Technology Management and Computer Science from Regis University. We maintain a robust system of data protection and cybersecurity resources, technology and processes. We regularly evaluate new and emerging risks and ever-changing legal and compliance requirements.
Biggest changeThe VP-IT has over 25 years of information technology management experience and has served as our VP-IT since January 2024. 59 We maintain a robust system of data protection and cybersecurity resources, technology and processes. We regularly evaluate new and emerging risks and ever-changing legal and compliance requirements.
As such, we have not spent any material amount of capital on addressing information security breaches in the last three years, nor have we incurred any material expenses from penalties and settlements related to a material breach during this same time. For additional information about our cybersecurity risks, please refer to “ Item 1A.
As such, we have not spent any material amount of capital on addressing information security breaches in the last three years, nor have we incurred any material expenses from penalties and settlements related to a material breach during this same time. For additional information about our cybersecurity risks, refer to “ Item 1A.
Vigil is responsible for implementing our cybersecurity strategy, managing daily operations, coordinating incident response, and regularly and routinely reviewing our security model and its practices and future initiatives with external auditors to ensure alignment with industry best practices, changes in audit compliance requirements, and adherence to planned business objectives, as well as providing regular updates and reports on our cybersecurity status and risk assessments to the Board.
The VP-IT is responsible for implementing our cybersecurity strategy, managing daily operations, coordinating incident response, and regularly and routinely reviewing our security model and its practices and future initiatives with external auditors to ensure alignment with industry best practices, changes in audit compliance requirements, and adherence to planned business objectives, as well as providing regular updates and reports on our cybersecurity status and risk assessments to the Board.
Risk Factors - We are subject to cyber security risks. A cyber incident could occur and result in information theft, data corruption, operational disruption, or financial loss .”. Item 2. Properties. The information required by Item 2 is contained in “Item 1. Business ” and is incorporated herein by reference.
Risk Factors - Risks Related to Our Business and Operations - We are subject to cyber security risks. A cyber incident could occur and result in information theft, data corruption, operational disruption, or financial loss .” Item 2. Properties. The information required by Item 2 is contained in “Item 1. Business ” and is incorporated herein by reference.
This program deploys both commercially available solutions and proprietary systems to manage threats to our information technology environment actively and includes a defense-in-depth approach with multiple layers of security controls, including network segmentation, security monitoring, endpoint protection, and identity and access management, as well as data protection best practices and data loss prevention controls, all of which are intended to preserve the confidentiality, integrity, and continued availability of all information owned by, or in the care of, us.
This program deploys third-party cybersecurity solutions to actively manage threats to our information technology environment and includes a defense-in-depth approach with multiple layers of security controls, including network segmentation, security monitoring, endpoint protection, and identity and access management, as well as data protection best practices and data loss prevention controls, all of which are intended to preserve the confidentiality, integrity, and continued availability of all information owned by, or in the care of, us.
Our Vice President of Information Technology, Jerry Vigil, leads our cybersecurity initiatives, reporting directly to the Chief Administrative Officer and Corporate Secretary and maintains open communication channels with the broader senior management team, the Board, and our Audit Committee. Mr.
Our Vice President of Information Technology (“VP-IT”) leads our cybersecurity initiatives, reporting directly to the Chief Administrative Officer and Corporate Secretary and maintains open communication channels with the broader senior management team, the Board, and our Audit Committee.
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Mr. Vigil has over 25 years of information technology management experience and has served as our Vice President of Information Technology since January 2024. Mr. Vigil served in the same 59 Table of Contents role at HighPoint Resources Corporation from May 2014 until its merger with us in April 2021. Mr.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeDisclosure of certain environmental matters is required when a governmental authority is a party to the proceedings and the proceedings involve potential monetary sanctions that we believe could exceed $0.3 million. We have received Notices of Alleged Violations (“NOAV”) from the ECMC alleging violations of various Colorado statutes and ECMC regulations governing oil and gas operations.
Biggest changeFinancial Statements and Supplementary Data - Note 6 - Commitments and Contingencies .” Disclosure of certain environmental matters is required when a governmental authority is a party to the proceedings and the proceedings involve potential monetary sanctions that we reasonably believe could exceed a specified threshold.
For additional information regarding legal proceedings and environmental matters, refer to “ Part II, Item 8. Financial Statements and Supplementary Data - Note 6 - Commitments and Contingencies .” Enforcement.
For additional information regarding legal proceedings and environmental matters, refer to “ Part II, Item 8.
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We have further received notices from the Colorado Air Pollution Control Division. We continue to engage in discussions regarding resolution of the alleged violations and we anticipate the assessed penalties to be approximately $0.6 million. 60 Table of Contents Item 4. Mine Safety Disclosures. Not applicable. 61 Table of Contents PART II
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Pursuant to Item 103 of Regulation S-K, we have elected to apply a threshold of the lesser of $1.0 million or 1% of total current assets for purposes of determining whether disclosure of any such proceedings is required. Applying this threshold, we are not aware of any such proceedings required to be disclosed for the year ended December 31, 2024.
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Item 4. Mine Safety Disclosures. Not applicable. 60 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe decision to pay any future dividends is solely within the discretion of, and subject to approval by, the Board.
Biggest changeAs approved by our Board, cash dividends are comprised of a quarterly base dividend and a discretionary variable component. The decision to pay any future dividends is solely within the discretion of, and subject to approval by, our Board.
The following graph compares the cumulative total stockholder return for our common stock, the Standard and Poor’s 500 Stock Index (the “S&P 500 Index”) and the Standard and Poor’s 500 Oil & Gas Exploration & Production Index (“S&P O&G E&P Index”) over the five year period from December 31, 2018 through December 31, 2023.
The following graph compares the cumulative total stockholder return for our common stock, the Standard and Poor’s 500 Stock Index (the “S&P 500 Index”) and the Standard and Poor’s 500 Oil & Gas Exploration & Production Index (“S&P O&G E&P Index”) over the five year period from December 31, 2019 through December 31, 2024.
The graph assumes that $100 was invested on December 31, 2018 in our common stock, the S&P 500 Index, and the S&P O&G E&P Index and assumes reinvestment of any dividends. The stock price performance on the following graph is not necessarily indicative of future stock price performance. Item 6. [Reserved]. 63 Table of Contents
The graph assumes that $100 was invested on December 31, 2019 in our common stock, the S&P 500 Index, and the S&P O&G E&P Index and assumes reinvestment of any dividends. The stock price performance on the following graph is not necessarily indicative of future stock price performance. Item 6. [Reserved]. 62
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities. Market for Registrant’s Common Equity. Our common stock is listed on the NYSE under the symbol “CIVI”. Holders. As of February 23, 2024, there were approximately 143 registered holders of our common stock. Dividend Policy.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities. Market for Registrant’s Common Equity. Our common stock is listed on the NYSE under the symbol “CIVI”. Holders. As of February 21, 2025, there were approximately 111 registered holders of our common stock. Dividend Policy.
Other than as previously reported on our Current Reports on Form 8-K, filed with the SEC on June 20, 2023 and August 2, 2023, we had no sales of unregistered securities during the year ended December 31, 2023. 62 Table of Contents Stock Performance Graph.
Other than as previously reported on our Current Reports on Form 8-K, filed with the SEC on October 4, 2023 and January 2, 2024, we had no sales of unregistered securities during the year ended December 31, 2024. 61 Stock Performance Graph.
The stock repurchase program does not require any specific number of shares to be acquired and can be modified or discontinued by the Board at any time.
The stock repurchase program does not have a termination date, does not require any specific number of shares to be acquired, and can be modified or discontinued by our Board at any time. Sale of Unregistered Securities.
The following table provides information about our purchases of our common stock during the three months ended December 31, 2023.
Financial Statements and Supplementary Data - Note 5 - Debt. ” Issuer Purchases of Equity Securities. The following table provides information about our purchases of our common stock during the three months ended December 31, 2024.
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As approved by the Board, cash dividends are paid quarterly and consist of a base and variable component. Variable cash dividends are equal to 50% of Free Cash Flow, after the base cash dividend for the preceding twelve-month period and pro forma for all acquisition and divestiture activity, assuming pro forma compliance with certain leverage targets.
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For additional information on restrictions on our ability to pay cash dividends on our common stock, refer to “ Item 1A.
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Additionally, covenants contained in our Credit Facility and the indentures governing our senior notes restrict the payment of cash dividends on our common stock, as discussed further in “ Item 8. Financial Statements and Supplementary Data - Note 5 - Long-Term Debt ” of this report. Issuer Purchases of Equity Securities.
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Risk Factors – Risks Related to Our Common Stock - Our ability to pay dividends to or repurchase shares of common stock from our stockholders is restricted by applicable laws and regulations and requirements under certain of our debt agreements, including the Credit Facility and the indentures governing our senior notes ” and “ Item 8.
Removed
Total Number of Shares Purchased (2) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) Maximum Dollar value that May Yet be Purchased Plans or Programs (in thousands) (1) October 1, 2023 - October 31, 2023 912 $ 79.11 — $ 479,810 November 1, 2023 - November 30, 2023 366 $ 69.03 — 479,810 December 1, 2023 - December 31, 2023 87 $ 69.29 — 479,810 Total 1,365 $ 75.78 — $ 479,810 _________________________ (1) In February 2023, we announced that the Board provided authorization for the stock repurchase program pursuant to which we may, from time to time and through December 31, 2024, acquire shares of our common stock in the open market, in privately negotiated transactions, or through block trades, derivative transactions, or purchases made in accordance with the Rule 10b5-1 of the Exchange Act in an amount not to exceed $1.0 billion, exclusive of any fees, commissions, or other expenses related to such repurchases.
Added
Total Number of Shares Purchased (1) Average Price Paid per Share (2) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (3) Maximum Dollar Value that May Yet be Purchased as Part of Publicly Announced Plans or Programs (in thousands) (3) October 1, 2024 – October 31, 2024 578,459 $ 51.91 577,936 $ 392,038 November 1, 2024 – November 30, 2024 1,118,842 51.65 1,115,264 334,437 December 1, 2024 – December 31, 2024 1,482,941 47.16 1,479,563 264,659 Total 3,180,242 $ 49.60 3,172,763 $ 264,659 _________________________ (1) Purchases outside of the stock repurchase program represent shares withheld from officers, former officers, executives, and employees for the payment of personal income tax withholding obligations upon the vesting of restricted stock awards.
Removed
In June 2023, commensurate with the announcement of the Hibernia Acquisition and Tap Rock Acquisition, the Board reduced the amount of stock authorized for repurchase by us under the stock repurchase program from $1.0 billion to $500.0 million.
Added
The withheld shares are not considered common stock repurchased under the stock repurchase program. (2) Excludes commissions paid and excise taxes accrued related to stock repurchases.
Removed
(2) Purchases outside of our stock repurchase program represent shares withheld from officers, former officers, executives, and employees for the payment of personal income tax withholding obligations upon the vesting of restricted stock awards. The withheld shares are not considered common stock repurchased under the stock repurchase program. Sale of Unregistered Securities.
Added
(3) On July 30, 2024, our Board authorized a new stock repurchase program authorizing repurchases of up to $500 million of our outstanding shares of common stock, replacing our prior stock repurchase program, pursuant to which we are authorized, from time to time, to acquire shares of our common stock in the open market, in privately negotiated transactions, or through block trades, derivative transactions, or purchases made in accordance with Rule 10b-18 and Rule 10b5-1 of the Exchange Act.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

91 edited+34 added−38 removed30 unchanged
Biggest changeAverage Sales Price Year Ended December 31, Crude Oil (Per Bbl) (1) Natural Gas (Per Mcf) (2) NGL (Per Bbl) Production Cost (Per Boe) (3) 2023 DJ Basin $ 74.01 $ 2.54 $ 23.01 $ 3.93 Permian Basin $ 81.37 $ 1.07 $ 15.75 $ 6.59 Total $ 75.57 $ 2.28 $ 21.35 $ 4.47 2022 DJ Basin $ 91.70 $ 6.15 $ 35.76 $ 3.25 2021 DJ Basin $ 65.41 $ 3.84 $ 34.68 $ 3.41 _____________________________ (1) Crude oil sales in the DJ Basin exclude $1.3 million, $0.6 million, and $1.0 million of oil transportation revenues from third parties, which do not have associated sales volumes, for the years ended December 31, 2023, 2022, and 2021, respectively.
Biggest changeYear Ended December 31, Percent Change Average Sales Price 2024 2023 2022 2024-2023 2023-2022 Crude Oil (Per Bbl) DJ Basin $ 74.07 $ 74.01 $ 91.70 — % (19) % Permian Basin $ 76.30 $ 81.37 $ — (6) % 100 % Total $ 75.26 $ 75.57 $ 91.70 — % (18) % Natural gas (Per Mcf) DJ Basin $ 1.92 $ 2.54 $ 6.15 (24) % (59) % Permian Basin $ (0.56) $ 1.07 $ — (152) % 100 % Total $ 0.77 $ 2.28 $ 6.15 (66) % (63) % NGL (Per Bbl) DJ Basin $ 24.44 $ 23.01 $ 35.76 6 % (36) % Permian Basin $ 18.44 $ 15.75 $ — 17 % 100 % Total $ 21.09 $ 21.35 $ 35.76 (1) % (40) % Production Cost (Per Boe) (1) DJ Basin $ 4.09 $ 3.93 $ 3.25 4 % 21 % Permian Basin $ 5.77 $ 6.59 $ — (12) % 100 % Total $ 4.96 $ 4.47 $ 3.25 11 % 38 % _____________________________ (1) Represents lease operating expense and midstream operating expense per Boe using total sales volumes and excludes ad valorem and severance taxes. 68 Crude oil, natural gas, and NGL sales.
Severance and ad valorem taxes. Severance taxes represent taxes imposed by the states in which we operate based on the value of the crude oil, natural gas, and NGL we produce. Ad valorem taxes represent taxes imposed by specific jurisdictions in which we operate based on the assessed value of our properties in that region.
Severance taxes represent taxes imposed by the states in which we operate based on the value of the crude oil, natural gas, and NGL we produce. Ad valorem taxes represent taxes imposed by specific jurisdictions in which we operate based on the assessed value of our properties in that region.
We may use our available liquidity for operating activities, working capital requirements, capital expenditures, acquisitions, debt reduction, return of capital to stockholders, and for general corporate purposes. Our primary source of cash flows from operating activities is the sale of crude oil, natural gas, and NGL.
We may use our available liquidity for operating activities, working capital requirements, capital expenditures, acquisitions, debt reduction, the return of capital to stockholders, and for general corporate purposes. Our primary source of cash flows from operating activities is the sale of crude oil, natural gas, and NGL.
Financial Statements and Supplementary Data - Note 1 - Summary of Significant Accounting Policies .” Crude Oil and Natural Gas Properties Proved Properties. We account for our oil and gas properties under the successful efforts method of accounting. Under this method, the costs of development wells are capitalized to proved properties whether those wells are successful or unsuccessful.
Financial Statements and Supplementary Data - Note 1 - Summary of Significant Accounting Policies .” Crude Oil and Natural Gas Properties Proved Properties. We account for our crude oil and natural gas properties under the successful efforts method of accounting. Under this method, the costs of development wells are capitalized to proved properties whether those wells are successful or unsuccessful.
If circumstances dictate that the carrying value of unproved properties may not be recoverable, we perform a recoverability test. If carrying values exceed undiscounted future net cash flows associated with probable and possible reserves, impairment is measured and recorded at fair value.
If circumstances dictate that the carrying value of unproved properties may not be recoverable, we perform a recoverability test. If carrying values exceed the undiscounted future net cash flows associated with probable and possible reserves, impairment is measured and recorded at fair value.
The prices for these commodities are driven by a number of factors beyond our control, including global and regional product supply and demand, the impact of inflation and monetary policy, weather, product distribution, refining and processing capacity, regulatory constraints, and other supply chain dynamics, among other factors.
The prices for these commodities are driven by a number of factors beyond our control, including global and regional product supply and demand, the impact of inflation and monetary policy, weather, product distribution, transportation, processing, and refining capacity, regulatory constraints, and other supply chain dynamics, among other factors.
Free Cash Flow is a supplemental measure of liquidity and should not be viewed as a substitute for cash flows from operations because it excludes certain required cash expenditures.
Adjusted Free Cash Flow is a supplemental measure of liquidity and should not be viewed as a substitute for cash flows from operations because it excludes certain required cash expenditures.
Discussions of 2021 items and year-to-year comparisons between 2022 and 2021 that are not included in this Form 10-K can be found in “ Part II - Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations ” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
Discussions of 2022 items and year-to-year comparisons between 2023 and 2022 that are not included in this Form 10-K can be found in “ Part II - Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations ” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.
Reconciliation of Free Cash Flow to Cash Provided by Operating Activities Free Cash Flow is a supplemental non-GAAP financial measure that is calculated as net cash provided by operating activities before changes in operating assets and liabilities and less exploration and development of crude oil and natural gas properties, changes in working capital related to capital expenditures, and purchases of carbon credits.
Reconciliation of Cash Provided by Operating Activities to Adjusted Free Cash Flow Adjusted Free Cash Flow is a supplemental non-GAAP financial measure that is calculated as net cash provided by operating activities before changes in operating assets and liabilities and less exploration and development of crude oil and 73 natural gas properties, changes in working capital related to capital expenditures, and purchases of carbon credits.
However, we performed a sensitivity analysis on our proved reserve estimates as of December 31, 2023, to present a decrease of approximately 10% in crude oil and natural gas price (and holding all other factors constant), as the value of crude oil and natural gas influences the value of our proved reserves most significantly.
However, we performed a sensitivity analysis on our proved reserve estimates as of December 31, 2024, to present a decrease of approximately 10% in crude oil and natural gas price (and holding all other factors constant), as the value of crude oil and natural gas influences the value of our proved reserves most significantly.
Additionally, due to the combination of different units of volumetric measure, the number of decimal places presented and rounding, certain results may not calculate explicitly from the values presented in the tables. This section of this Form 10-K generally discusses 2023 and 2022 results and year-to-year comparisons between 2023 and 2022.
Additionally, due to the combination of different units of volumetric measure, the number of decimal places presented and rounding, certain results may not calculate explicitly from the values presented in the tables. This section of this Form 10-K generally discusses 2024 and 2023 results and year-to-year comparisons between 2024 and 2023.
(2) Included as a portion of general and administrative expense in the accompanying statements of operations. (3) Included as a portion of other income in the accompanying statements of operations.
(2) Included as a portion of general and administrative expense in the accompanying consolidated statements of operations. (3) Included as a portion of other income in the accompanying consolidated statements of operations.
We believe that Free Cash Flow provides additional information that may be useful to investors in evaluating our ability to generate cash from our existing crude oil and natural gas assets to fund future exploration and development activities and to return cash to stockholders.
We believe that Adjusted Free Cash Flow provides additional information that may be useful to investors and analysts in evaluating our ability to generate cash from our existing crude oil and natural gas assets to fund future exploration and development activities and to return cash to stockholders.
Material changes in prices also impact the current revenue stream, estimates of future reserves, borrowing base calculations, depletion expense, impairment assessments of oil and gas properties, asset retirement obligations, and values of properties in purchase and sale transactions.
Material changes in prices also impact the current revenue stream, estimates of future reserves, borrowing base calculations, depletion expense, impairment assessments of crude oil and natural gas properties, asset retirement obligations, and values of properties in purchase and sale transactions.
Material changes in prices can impact the value of oil and gas companies and the rate of return associated with the wells they develop and can hinder their ability to raise capital, borrow money, and retain personnel.
Material changes in prices can impact the value of crude oil and natural gas companies and the rate of return associated with the wells they develop and can hinder their ability to raise capital, borrow money, and retain personnel.
This estimated impact is based on available data as of December 31, 2023, and future events could require different adjustments to our DD&A rate. There were no significant impairment charges recognized related to our proved and unproved properties during the years ended December 31, 2023 or 2022.
This estimated impact is based on available data as of December 31, 2024, and future events could require different adjustments to our DD&A rate. There were no impairment charges recognized related to our proved and unproved properties during the years ended December 31, 2024 or 2023.
We do not presently anticipate the occurrence of any material effects on our business, financial condition, or results of operations in future periods as a result of capital designated on these initiatives. 67 Table of Contents Results of Operations The following discussion and analysis should be read in conjunction with our consolidated financial statements and the notes thereto contained in Item 8 of this Annual Report on Form 10-K.
We do not presently anticipate the occurrence of any material effects on our business, financial condition, or results of operations in future periods as a result of capital designated on these initiatives. 66 Results of Operations The following discussion and analysis should be read in conjunction with our consolidated financial statements and the notes thereto contained in Item 8 of this Annual Report on Form 10-K.
The preparation of these statements requires us to 76 Table of Contents make certain assumptions, judgments, and estimates that affect the reported amounts of assets, liabilities, revenues, and expenses, as well as the disclosure of contingent assets and liabilities and commitments as of the date of our consolidated financial statements. We evaluate our estimates and assumptions on an ongoing basis.
The preparation of these statements requires us to make certain assumptions, judgments, and estimates that affect the reported amounts of assets, liabilities, revenues, and expenses, as well as the disclosure of contingent assets and liabilities and commitments as of the date of our consolidated financial statements. We evaluate our estimates and assumptions on an ongoing basis.
Pricing we receive for our natural gas in both basins is correlated with the capacity of in-field gathering systems, compression, and processing facilities, as well as transportation pipelines out of the 66 Table of Contents basins, of which are majority owned and operated by third parties.
Pricing we receive for our natural gas in both basins is correlated with the capacity of in-field gathering systems, compression, and processing facilities, as well as transportation pipelines out of the basins, of which are majority owned and operated by third parties.
We regularly consider which resources, including debt and equity financings, are available to meet our future financial obligations, planned capital expenditures, and liquidity requirements. Funding for these requirements may be provided by any combination of the sources of liquidity outlined above. We expect our 2024 capital program to be funded by cash flows from operations.
We regularly consider which resources, including debt and equity financing, are available to meet our future financial obligations, planned capital expenditures, and liquidity requirements. Funding for these requirements may be provided by any combination of the sources of liquidity outlined above. We expect our 2025 capital program to be funded by cash flows from operations.
Adjusted EBITDAX is a non-GAAP measure that we present because we believe it provides useful additional information to investors and analysts, as a performance measure, for analysis of our ability to internally generate funds for exploration, development, acquisitions, and to service debt. We are also subject to financial covenants under our Credit Facility based on adjusted EBITDAX ratios.
We present Adjusted EBITDAX because we believe it provides useful additional information to investors and analysts, as a performance measure, for analysis of our ability to internally generate funds for exploration, development, acquisitions, and to service debt. We are also subject to financial covenants under our Credit Facility based on Adjusted EBITDAX ratios.
Our material long-term cash requirements from various contractual and other obligations include: debt obligations and related interest payments, firm transportation and minimum volume agreements, taxes, asset retirement obligations, and leases. Please refer to “ Item 8. Financial Statements and Supplementary Data ” for additional information.
Our material long-term cash requirements from various contractual and other obligations include: debt obligations and related interest payments, firm transportation and minimum volume agreements, taxes, asset retirement obligations, and leases. Refer to "Item 8. Financial Statements and Supplementary Data” for additional information.
The following table provides a reconciliation of the GAAP financial measure of Standardized Measure to the non-GAAP financial measure of PV-10 as of the periods presented (in millions): As of December 31, 2023 2022 2021 Standardized Measure $ 8,269.3 $ 7,927.5 $ 4,412.1 Present value of future income taxes discounted at 10% 1,110.7 1,906.8 915.1 PV-10 $ 9,380.0 $ 9,834.3 $ 5,327.2 Reconciliation of average sales price, after derivatives Average sales price, after derivatives is a non-GAAP financial measure that incorporates the net effect of derivative cash receipts from or payments on commodity derivatives that are presented in our statement of cash flows, netted into the average sales price, before derivatives, the most directly comparable GAAP financial measure.
The following table provides a reconciliation of the GAAP financial measure of Standardized Measure to the non-GAAP financial measure of PV-10 as of the periods presented (in millions): As of December 31, 2024 2023 2022 Standardized Measure $ 8,315.4 $ 8,269.3 $ 7,927.5 Present value of future income taxes discounted at 10% 899.9 1,110.7 1,906.8 PV-10 $ 9,215.3 $ 9,380.0 $ 9,834.3 Reconciliation of average sales price, after derivatives Average sales price, after derivatives is a non-GAAP financial measure that incorporates the net effect of derivative cash receipts from or payments on commodity derivatives that are presented in our accompanying consolidated statements of cash flows, netted into the average sales price, before derivatives, the most directly comparable GAAP financial measure.
Non-GAAP Financial Measures Reconciliation of EBITDAX to Net Income Adjusted EBITDAX represents earnings before interest, income taxes, depreciation, depletion, and amortization, exploration expense, and other non-cash and non-recurring charges.
Non-GAAP Financial Measures Reconciliation of Net Income to Adjusted EBITDAX Adjusted EBITDAX is a supplemental non-GAAP financial measure that represents earnings before interest, income taxes, depreciation, depletion, and amortization, exploration expense, and other non-cash and non-recurring charges.
As of December 31, 2023, our liquidity was $2.2 billion, consisting of cash on hand of $1.1 billion and $1.1 billion of available borrowing capacity on our Credit Facility. Borrowing capacity under the Credit Facility is primarily based on the value assigned to the proved reserves attributable to our crude oil and natural gas interests.
As of December 31, 2024, our liquidity was $1.82 billion, consisting of cash on hand of $75.8 million and $1.75 billion of available borrowing capacity on our Credit Facility. Borrowing capacity under the Credit Facility is primarily based on the value assigned to the proved reserves attributable to our crude oil and natural gas interests.
Financial Statements and Supplementary Data - Note 9 - Derivatives ” for additional disclosures. Critical Accounting Estimates The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with GAAP.
Critical Accounting Estimates The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with GAAP.
Our derivative loss for the year ended December 31, 2022 of $335.2 million was due to cash settlement losses, partially offset by fair market value adjustment gains attributable to lower market prices relative to our open positions. Please refer to “ Item 8. Financial Statements and Supplementary Data - Note 9 - Derivatives ” for additional discussion. Interest expense.
Our derivative gain for the year ended December 31, 2023 was due to fair market value adjustments resulting from lower market prices relative to our open positions, partially offset by cash settlement losses. Refer to “ Item 8. Financial Statements and Supplementary Data - Note 9 - Derivatives ” for additional discussion. Interest expense.
The process of estimating and evaluating crude oil and natural gas reserves is complex, requiring the evaluation of available geological, geophysical, engineering and economic data to estimate underground accumulations of crude oil and natural gas that cannot be precisely measured. Consequently, we engage a third-party petroleum consultant to prepare our estimates of crude oil and natural gas reserves.
The process of estimating and evaluating crude oil and natural gas reserves is complex, requiring the evaluation of available geological, geophysical, engineering and economic data to estimate underground accumulations of crude oil and natural gas that cannot be precisely measured.
Financial Statements and Supplementary Data - Note 12 - Income Taxes ” for additional discussion. Liquidity and Capital Resources Our primary sources of liquidity include cash flows from operating activities, available borrowing capacity under the Credit Facility, potential proceeds from equity and/or debt capital markets transactions, potential proceeds from sales of assets, and other sources.
Liquidity and Capital Resources Our primary sources of liquidity include cash flows from operating activities, available borrowing capacity under the Credit Facility, potential proceeds from equity and/or debt capital markets transactions, potential proceeds from sales of assets, and other sources.
During 2023 and 2022, we experienced cost inflation on labor, power and other key costs in our operations and development program, however, it did not have a material impact on our results of operations for the periods ended December 31, 2023, 2022, or 2021.
While we experience cost inflation on labor, power, and other key costs in our operations and development program, we do not believe it had a material impact on our results of operations for the periods ended December 31, 2024, 2023, or 2022.
As a result, our proved reserve quantities would decrease by 19.6 MMBoe or 3%. The reserve decrease would have increased our DD&A rate by $0.49 per Boe and decreased our pre-tax income by $38.1 million for the year ended December 31, 2023.
As a result, our proved reserve quantities would decrease by 29.7 MMBoe or 4%. The reserve decrease would have increased our DD&A rate by $0.64 per Boe and decreased our pre-tax income by $81.0 million for the year ended December 31, 2024.
Total product revenues decreased by 8% to $3.5 billion for the year ended December 31, 2023 compared to $3.8 billion for the year ended December 31, 2022.
Total product revenues increased by 50% to $5.2 billion for the year ended December 31, 2024 compared to $3.5 billion for the year ended December 31, 2023.
General and administrative expense. Our general and administrative expense increased 12% to $161.1 million for the year ended December 31, 2023 from $143.5 million for the year ended December 31, 2022, and decreased 10% on an equivalent basis per Boe.
General and administrative expense increased 41%, to $227.0 million for the year ended December 31, 2024, from $161.1 million for the year ended December 31, 2023, and decreased 13% on an equivalent basis per Boe.
For a significant portion of the midstream contracts assumed with the Hibernia Acquisition and the Tap Rock Acquisition, gathering, transportation, and processing costs are incurred subsequent to the transfer of control; thereby, these costs are recorded net within crude oil and natural gas sales. As a result, gathering, transportation, and processing expense per Boe decreased period over period.
GTP expense per Boe decreased period over period as, with respect to a significant portion of the midstream contracts assumed in the Hibernia, Tap Rock, and Vencer acquisitions, GTP costs are incurred subsequent to the transfer of control; thereby, these costs are recorded net within crude oil, natural gas, and NGL sales. 69 Severance and ad valorem taxes.
Executive Summary We are an independent exploration and production company focused on the acquisition, development, and production of crude oil and associated liquids-rich natural gas primarily in the DJ Basin in Colorado and the Permian Basin in Texas and New Mexico. Our primary objective is to maximize stockholder returns by responsibly developing our crude oil and natural gas resources.
Executive Summary We are an independent exploration and production company focused on the acquisition, development, and production of crude oil and associated liquids-rich natural gas from our premier assets in the DJ Basin in Colorado and the Permian Basin in Texas and New Mexico.
(2) The average NYMEX natural gas HH spot price for the years ended December 31, 2023 and 2022 was $2.53 and $6.45, respectively.
(2) The average NYMEX natural gas HH price for the years ended December 31, 2024 and 2023 was $2.27 and $2.74, respectively.
Additionally, the incremental decrease in severance and ad valorem taxes per Boe is primarily due to an increase in product revenues generated through the Hibernia Acquisition in the state of Texas, which generally levies lower severance and ad valorem tax rates relative to Colorado and New Mexico. Depreciation, depletion, and amortization.
The decrease in severance and ad valorem taxes per Boe was primarily due to an increase in crude oil, natural gas, and NGL sales generated through the Hibernia and Vencer acquisitions in the state of Texas, which generally levies lower severance and ad valorem tax rates relative to the states of Colorado and New Mexico. Depreciation, depletion, and amortization.
Our DJ Basin natural gas production is sold based on prices established for Colorado Interstate Gas (CIG) and our Permian Basin natural gas production is based on the Waha Hub in West Texas.
Our natural gas production is typically sold at a discount to the benchmark NYMEX HH price. Our DJ Basin natural gas production is sold based on prices established for CIG and our Permian Basin natural gas production is based on the Waha Hub in West Texas.
Our severance and ad valorem taxes decreased 10% to $276.5 million for the year ended December 31, 2023 from $305.7 million for the year ended December 31, 2022, and decreased 28% on an equivalent basis per Boe.
Severance and ad valorem taxes increased 36%, to $377.4 million for the year ended December 31, 2024, from $276.5 million for the year ended December 31, 2023, and decreased 16% on an equivalent basis per Boe.
Unproved Properties. Unproved properties consist of the costs to acquire undeveloped leases and are not subject to depletion until they are transferred to proved properties. Leasehold costs are transferred to proved properties on an ongoing basis as the properties to which they relate are evaluated and proved reserves established. Unproved properties are routinely evaluated for continued capitalization or impairment.
Leasehold costs are transferred to proved properties on an ongoing basis as the properties to which they relate are evaluated and proved reserves established. Unproved properties are routinely evaluated for impairment.
Derivative gain (loss), net. Our derivative gain for the year ended December 31, 2023 of $9.3 million was due to fair market value adjustments resulting from lower market prices relative to our open positions, partially offset by cash settlement 71 Table of Contents losses.
Our derivative gain for the year ended December 31, 2024 was $37.5 million, as compared to a gain of $9.3 million for the year ended December 31, 2023. Our derivative gain for the year ended December 31, 2024 was due to fair market value adjustments resulting from lower market prices relative to our open positions and cash settlement net gains.
As a result, revisions in existing reserve estimates occur. If the estimates of proved reserve quantities decline, the rate at which we record depletion expense will increase, which would reduce future net income. Changes in depletion rate calculations caused by changes in reserve quantities are made prospectively.
If the estimates of proved reserve quantities decline, the rate at which we record depletion expense will increase, which would reduce future net income. Changes in depletion rate calculations caused by changes in reserve quantities are made prospectively. In addition, a decline in reserve estimates may impact the outcome of our assessment of proved and unproved properties for impairment.
Our effective tax rate differs from the statutory United States federal income tax rate of 21% due to the effect of state income taxes, excess tax benefits and deficiencies on stock-based compensation awards, tax limitations on compensation of covered individuals, changes in valuation allowances, and other permanent differences. Please refer to “ Item 8.
Our effective tax rate differs from the amount that would be provided by applying the statutory United States federal income tax rate of 21% to income before income taxes due to the effect of state income taxes, excess tax benefits and deficiencies on stock-based compensation awards, tax limitations on compensation of covered individuals, tax credits, and other permanent differences.
Significant inputs and assumptions to this estimation include, but are not limited to, reserves volumes, future operating and development costs, future commodity prices, inclusive of applicable differentials, and a market-based weighted average cost of capital rate. The expected future cash flows used for impairment reviews include future sales volumes associated with proved developed producing reserves and risk-adjusted proved undeveloped reserves.
Significant inputs and assumptions to this estimation include, but are not limited to, reserves volumes, future operating and development costs, future commodity prices, inclusive of applicable differentials, and a market-based weighted average cost of capital rate.
As of the date of filing of this report, the available borrowing capacity on our Credit Facility is $1.45 billion. In addition, the maturity of the Credit Facility was extended to August 2028. The next scheduled borrowing base redetermination date is set to occur in May 2024.
As of February 21, 2025, the available borrowing capacity on our Credit Facility was $1.70 billion. Our Credit Facility is set to mature in August 2028, with the next scheduled borrowing base redetermination date to occur in May 2025.
Any deficiency of the purchase price over the estimated fair values of the net assets acquired is recorded as bargain purchase gain in the statements of operations. During 2023, we accounted for two business combinations under the acquisition method of accounting, the Hibernia Acquisition and the Tap Rock Acquisition.
Any deficiency of the purchase price over the estimated fair values of the net assets acquired is recorded as bargain purchase gain in the statements of operations. 76 During 2024, we accounted for one business combination under the acquisition method of accounting, the Vencer Acquisition. In estimating the fair values of assets acquired and liabilities assumed, we make various assumptions.
Gathering, transportation, and processing expense increased $3.2 million, or 1%, to $290.6 million for the year ended December 31, 2023 from $287.5 million for the year ended December 31, 2022, and decreased 19% on an equivalent basis per Boe.
Gathering, transportation, and processing (“GTP”) expense increased 30%, to $377.7 million for the year ended December 31, 2024, from $290.6 million for the year ended December 31, 2023, and decreased 20% on an equivalent basis per Boe.
The computation of depletion expense takes into consideration restoration, dismantlement, and abandonment costs as well as the anticipated proceeds from salvaging equipment. We assess proved properties for impairment whenever events or circumstances indicate that their carrying value may not be recoverable. If carrying values exceed undiscounted future net cash flows, impairment is measured and recorded at fair value.
We assess proved properties for impairment whenever events or circumstances indicate that their carrying value may not be recoverable. If carrying values exceed undiscounted future net cash flows, impairment is measured and recorded at fair value.
The components of interest expense for the periods presented are as follows (in thousands): Year Ended December 31, 2023 2022 Senior Notes $ 154,607 $ 22,521 Credit Facility 12,100 115 Commitment and letter of credit fees under the Credit Facility 6,231 5,099 Amortization of deferred financing costs 9,293 4,464 Finance lease 509 — Total interest expense $ 182,740 $ 32,199 Income tax expense .
The components of interest expense for the periods presented are as follows (in thousands): Year Ended December 31, 2024 2023 Senior Notes $ 337,438 $ 154,607 Credit Facility 59,007 12,100 Commitment and letter of credit fees under the Credit Facility 5,493 6,231 Amortization of deferred financing costs and deferred acquisition consideration 52,702 9,293 Other 1,663 509 Total interest expense $ 456,303 $ 182,740 70 Income tax expense .
In the DJ Basin, we operated approximately 2.0 drilling rigs and 1.8 completion crews, allowing us to drill 107 gross (90.6 net) operated wells and turn to sales 148 gross (124.3 net) operated wells.
In the DJ Basin, we operated approximately 1.3 drilling rigs and 1.5 completion crews, allowing us to drill 85 gross (75.1 net) operated wells and turn to sales 115 gross (103.9 net) operated wells.
For the year ended December 31, 2023, the derivative cash settlement loss for crude oil and natural gas was $59.5 million and $8.7 million, respectively. For the year ended December 31, 2022, the derivative cash settlement loss for crude oil, natural gas, and NGL was $346.4 million, $189.4 million, and $41.0 million, respectively. Please refer to “ Item 8.
For the year ended December 31, 2024, the derivative cash settlement loss for crude oil was $41.7 million and the derivative cash settlement gain for natural gas was $48.1 million. For the year ended December 31, 2023, the derivative cash settlement loss for crude oil and natural gas was $59.5 million and $8.7 million, respectively.
The purchase price consideration for the Hibernia Acquisition and the Tap Rock Acquisition of $2.2 billion and $2.5 billion, respectively, was allocated to the assets acquired and liabilities assumed based upon their estimated acquisition date fair values and resulted in no goodwill or bargain purchase gain.
When estimating the fair value of unproved properties, reserve adjustment factors are applied to probable and possible reserves. The purchase price consideration for the Vencer of $2.0 billion was allocated to the assets acquired and liabilities assumed based upon their estimated acquisition date fair values and resulted in no goodwill or bargain purchase gain.
In estimating the fair values of assets acquired and liabilities assumed, we make various assumptions. The most significant of these assumptions relate to the estimated fair values assigned to proved and unproved properties, which resulted in $2.3 billion for the Hibernia Acquisition and $2.6 billion for the Tap Rock Acquisition.
The most significant of these assumptions relate to the estimated fair values assigned to proved and unproved properties, which resulted in $2.1 billion for the Vencer Acquisition.
Financial Statements and Supplementary Data - Note 5 - Long-Term Debt " for additional discussion. 64 Table of Contents During 2023, our total capital expenditures in drilling, completions, land, and midstream assets were $1.4 billion.
Financial Statements and Supplementary Data - Note 2 - Acquisitions and Divestitures ” and “ Item 8. Financial Statements and Supplementary Data - Note 5 - Debt ” for additional discussion. 63 During 2024, our total capital expenditures in drilling, completions, land, and midstream assets were $1.9 billion.
For more information regarding reserve estimations, including additional crude oil sensitives and descriptions over historical reserve revisions, see “ Part I - Item 1. - Business ”, “ Part I - Item 2. Properties ”, and “ Item 8.
For more information regarding reserve estimations, including additional sensitives and descriptions over historical reserve revisions, see “ Part I - Item 1. - Business ”, “ Part I - Item 2. Properties ”, and “ Item 8. Financial Statements and Supplementary Data - Note 16 - Disclosures About Oil and Gas Producing Activities ” included elsewhere in this report.
The following table presents a reconciliation of the GAAP financial measure of net cash provided by operating activities to the non-GAAP financial measure of Free Cash Flow (in thousands): Year Ended December 31, 2023 2022 Net cash provided by operating activities $ 2,238,760 $ 2,477,041 Add back: Changes in operating assets and liabilities, net (71,932) (276,141) Cash flow from operations before changes in operating assets and liabilities 2,166,828 2,200,900 Less: Exploration and development of crude oil and natural gas properties (1,352,388) (967,096) Less: Changes in working capital related to capital expenditures (12,349) (7,679) Less: Purchases of carbon credits and renewable energy credits (6,151) (7,298) Free Cash Flow $ 795,940 $ 1,218,827 75 Table of Contents Reconciliation of Proved Reserves PV-10 to Standardized Measure PV-10 is derived from the Standardized Measure, which is the most directly comparable GAAP financial measure.
The following table presents a reconciliation of the GAAP financial measure of net cash provided by operating activities to the non-GAAP financial measure of Adjusted Free Cash Flow for the periods presented (in thousands): Year Ended December 31, 2024 2023 Net cash provided by operating activities $ 2,865,228 $ 2,238,760 Add back: Changes in operating assets and liabilities, net 339,264 (71,932) Cash flow from operations before changes in operating assets and liabilities 3,204,492 2,166,828 Less: Cash paid for capital expenditures for drilling and completion activities and other fixed assets (1,924,426) (1,352,388) Less: Changes in working capital related to capital expenditures (8,208) (12,349) Capital expenditures (1,932,634) (1,364,737) Less: Purchases of carbon credits and renewable energy credits (5,744) (6,151) Adjusted Free Cash Flow $ 1,266,114 $ 795,940 Reconciliation of Standardized Measure to Proved Reserves PV-10 PV-10 is derived from the Standardized Measure, which is the most directly comparable GAAP financial measure.
We were in compliance with all covenants under the Credit Facility as of December 31, 2023, and through the filing of this report. Please refer to “ Item 8.
We were in compliance with all covenants under the Credit Facility as of December 31, 2024, and through the filing of this Annual Report on Form 10-K. Refer to “ Item 8. Financial Statements and Supplementary Data - Note 5 - Debt ” for additional information.
The Vencer Acquisition included approximately 44,000 net acres in the Midland Basin in exchange for aggregate consideration of approximately $1.0 billion in cash and 7.3 million shares of our common stock paid at the closing of the Vencer Acquisition and $550.0 million in cash to be paid on or before January 3, 2025.
The Vencer Acquisition included approximately 44,000 net acres in the Midland Basin, which is part of the larger Permian Basin, and certain related crude oil and natural gas assets with average production of approximately 49 MBoe per day as of January 2, 2024 in exchange for aggregate adjusted consideration of approximately $2.0 billion, consisting of $1.0 billion in cash paid at the closing of the Vencer Acquisition, 7.2 million shares of our common stock issued at the closing of the Vencer Acquisition, and $550.0 million in cash to be paid on or before January 3, 2025, inclusive of customary post-closing adjustments.
During the year ended December 31, 2023, we incurred $84.3 million in short-term financing fees as well as legal, advisor, and other costs associated with the Hibernia Acquisition, Tap Rock Acquisition, and Vencer Acquisition.
During the year ended December 31, 2023, we incurred $84.3 million in short-term financing fees as well as legal, advisor, and other costs associated with the Hibernia, Tap Rock, and Vencer acquisitions. Refer to “ Item 8. Financial Statements and Supplementary Data - Note 2 - Acquisitions and Divestitures ” for additional discussion over our acquisitions. General and administrative expense.
Pursuant to this method, we allocate the cost of the acquisition, or purchase price, to assets acquired and liabilities assumed based on fair values as of the acquisition date. Any excess of the purchase price over the fair value amounts assigned to assets and liabilities is recorded as goodwill.
Any excess of the purchase price over the fair value amounts assigned to assets and liabilities is recorded as goodwill.
If we were to exclude the production of our Permian Basin from this calculation, it would result in a $0.22 per Boe, or 43%, change period over period. 70 Table of Contents Lease operating expense.
If we were to exclude the production of our Permian Basin assets from this calculation, it would result in a $0.06 per Boe, or 8% increase between the year ended December 31, 2024 and 2023. Lease operating expense.
These pillars are: generate Free Cash Flow, maintain a premier balance sheet, return cash to stockholders, and demonstrate ESG leadership. 2023 Financial and Operating Results Our financial and operational results for the year ended December 31, 2023: • Total sales volumes increased 25% when compared to 2022 and average sales volumes per day increased to 273 MBoe/d (1) compared to 170 MBoe/d during 2022, in each case, primarily as a result of the Hibernia Acquisition and the Tap Rock Acquisition; • Cash dividends declared of $668.7 million, or $7.60 per share; • Repurchased 5.2 million shares of our common stock at a weighted average price of $61.21 per share; • Net income of $784.3 million, or $9.02 per diluted share; • Cash flows provided by operating activities were $2.2 billion compared to $2.5 billion during 2022.
Financial and Operating Results Our financial and operational results for the year ended December 31, 2024: • Total sales volumes increased 63% when compared to the year ended December 31, 2023; average sales volumes per day increased to 345 MBoe/d compared to 212 MBoe/d during the year ended December 31, 2023, in each case, primarily as a result of the Hibernia, Tap Rock and Vencer Acquisitions; • Net income of $838.7 million, or $8.46 per diluted share for the year ended December 31, 2024 compared to $784.3 million, or $9.02 per diluted share for the year ended December 31, 2023; • Cash flows provided by operating activities were $2.9 billion compared to $2.2 billion during the year ended December 31, 2023.
Estimated deferred taxes are based on available information concerning the tax basis of assets acquired and liabilities assumed and loss carryforwards at the acquisition date, although such estimates may change in the future as additional information becomes known. 78 Table of Contents Effects of Inflation and Pricing Inflation in the United States averaged 4.1% in 2023, 8.0% in 2022, and 4.7% in 2021.
In addition, we record deferred taxes for any differences between the assigned fair values and tax basis of assets and liabilities. Estimated deferred taxes are based on available information concerning the tax basis of assets acquired and liabilities assumed and loss carryforwards at the acquisition date, although such estimates may change in the future as additional information becomes known.
Significant inputs and engineering assumptions used in developing the estimates of proved crude oil and natural gas reserves include reserves volumes, future operating and development costs, historical commodity prices, and our ability to convert proved undeveloped reserves to producing properties within five years of their initial proved booking. 77 Table of Contents The data for a given property may also change substantially over time as a result of numerous factors, including additional development activity, evolving production history and a continual reassessment of the viability of production under changing economic conditions.
Significant inputs and engineering assumptions used in developing the estimates of proved crude oil and natural gas reserves include reserves volumes, future operating and development costs, historical commodity prices, and our ability to convert proved undeveloped reserves to producing properties within five years of their initial proved booking.
Our interest expense for the years ended December 31, 2023 and 2022 was $182.7 million and $32.2 million, respectively. Average debt outstanding for the years ended December 31, 2023 and 2022 was $2.1 billion and $435.5 million, respectively.
Average debt outstanding for the years ended December 31, 2024 and 2023 was $4.9 billion and $2.1 billion, respectively.
The foregoing destabilizing factors have caused dramatic fluctuations in global financial markets and uncertainty about world-wide crude oil and natural gas supply and demand, which in turn has increased the volatility of crude oil and natural gas prices.
The foregoing destabilizing factors have caused dramatic fluctuations in global financial markets and uncertainty about world-wide crude oil and natural gas supply and demand, which in turn has increased the volatility of crude oil and natural gas prices. 64 The below graph depicts monthly average NYMEX WTI crude oil and NYMEX HH natural gas price over the years ended December 31, 2024 and 2023. _____________________________ (1) The average NYMEX WTI crude oil price for the years ended December 31, 2024 and 2023 was $75.72 and $77.62, respectively.
The following table provides a reconciliation of the GAAP financial measure of average sales price, before derivatives to the non-GAAP financial measure of average sales prices, after derivatives for the periods presented: Year Ended December 31, 2023 2022 Average crude oil sales price (per Bbl) (1) $ 75.57 $ 91.70 Effects of derivatives, net (per Bbl) (3) (1.62) (12.53) Average crude oil sales price (after derivatives) (per Bbl) $ 73.95 $ 79.17 Average natural gas sales price (per Mcf) (2) $ 2.28 $ 6.15 Effects of derivatives, net (per Mcf) (3) (0.06) (1.68) Average natural gas sales price (after derivatives) (per Mcf) $ 2.22 $ 4.47 Average NGL sales price (per Bbl) $ 21.35 $ 35.76 Effects of derivatives, net (per Bbl) (3) — (2.62) Average NGL sales price (after derivatives) (per Bbl) $ 21.35 $ 33.14 _________________________ (1) Crude oil sales excludes $1.3 million and $0.6 million of crude oil transportation revenues from third parties, which do not have associated sales volumes, for the years ended December 31, 2023 and 2022, respectively.
The following table provides a reconciliation of the GAAP financial measure of average sales price, before derivatives to the non-GAAP financial measure of average sales prices, after derivatives for the periods presented: 74 Year Ended December 31, 2024 2023 Average crude oil sales price (per Bbl) $ 75.26 $ 75.57 Effects of derivatives, net (per Bbl) (1) (0.72) (1.62) Average crude oil sales price (after derivatives) (per Bbl) $ 74.54 $ 73.95 Average natural gas sales price (per Mcf) $ 0.77 $ 2.28 Effects of derivatives, net (per Mcf) (1) 0.22 (0.06) Average natural gas sales price (after derivatives) (per Mcf) $ 0.99 $ 2.22 Average NGL sales price (per Bbl) $ 21.09 $ 21.35 Effects of derivatives, net (per Bbl) (1) — — Average NGL sales price (after derivatives) (per Bbl) $ 21.09 $ 21.35 _________________________ (1) Derivatives economically hedge the price we receive for crude oil, natural gas, and NGL.
The increase in total DD&A expense was primarily due to a 25% increase in sales volumes between periods driven by the Hibernia Acquisition and the Tap Rock Acquisition.
The increase in total DD&A expense was primarily due to a 63% increase in sales volumes between periods driven by the Hibernia, Tap Rock, and Vencer acquisitions. The increase in DD&A expense per Boe was due to an increase in the depletion rate driven by a greater increase in the depletable property base in proportion to proved reserves. Transaction costs.
We periodically enter into derivative contracts for crude oil, natural gas, and NGL using NYMEX futures or over-the-counter derivative financial instruments. We receive a premium or discount to the benchmark WTI price for our crude oil production. The differential between the benchmark price and the price we receive can reflect adjustments for quality, location, and transportation.
We receive a premium or discount to the benchmark WTI price for our crude oil production. The differential between the benchmark price and the price we receive can reflect adjustments for quality, location, and transportation. Our DJ Basin crude oil price includes a higher-grade quality differential and includes a transportation differential for delivery to Cushing, Oklahoma.
Because adjusted EBITDAX excludes some, but not all items that affect net income and may vary among companies, the adjusted EBITDAX amounts presented may not be comparable to similar metrics of other companies. 74 Table of Contents The following table presents a reconciliation of the GAAP financial measure of net income to the non-GAAP financial measure of adjusted EBITDAX (in thousands): Year Ended December 31, 2023 2022 Net income $ 784,288 $ 1,248,080 Exploration 2,178 6,981 Depreciation, depletion, and amortization 1,171,192 816,446 Abandonment and impairment of unproved properties — 17,975 Unused commitments and other (1) 5,013 3,641 Transaction costs 84,328 24,683 Stock-based compensation (2) 34,931 31,367 Non-recurring general and administrative expense (2) — 18,037 Derivative (gain) loss (9,307) 335,160 Derivative cash settlement loss (68,246) (576,802) Interest expense 182,740 32,199 Interest income (3) (33,347) — (Gain) loss on property transactions, net 254 (15,880) Income tax expense 215,166 405,698 Adjusted EBITDAX $ 2,369,190 $ 2,347,585 _________________________ (1) Included as a portion of other operating expense in the accompanying statements of operations.
The following table presents a reconciliation of the GAAP financial measure of net income to the non-GAAP financial measure of Adjusted EBITDAX for the periods presented (in thousands): Year Ended December 31, 2024 2023 Net income $ 838,723 $ 784,288 Exploration 14,322 2,178 Depreciation, depletion, and amortization 2,056,427 1,171,192 Unused commitments (1) 1,730 5,013 Transaction costs 31,419 84,328 Stock-based compensation (2) 48,272 34,931 Derivative gain, net (37,490) (9,307) Derivative cash settlement gain (loss), net 6,435 (68,246) Interest expense 456,303 182,740 Interest income (3) (11,058) (33,347) Loss on property transactions, net 2,566 254 Income tax expense 243,972 215,166 Adjusted EBITDAX $ 3,651,621 $ 2,369,190 _________________________ (1) Included as a portion of other operating expense in the accompanying consolidated statements of operations.
Our depreciation, depletion, and amortization expense (“DD&A”) increased 43% to $1.2 billion for the year ended December 31, 2023 from $816.4 million for the year ended December 31, 2022, and increased 15% on an equivalent basis per Boe.
Depreciation, depletion, and amortization (“DD&A”) expense increased 76%, to $2.1 billion for the year ended December 31, 2024 from $1.2 billion for the year ended December 31, 2023, and increased 8% on an equivalent basis per Boe. Subsequent to December 31, 2023, we invested approximately $3.7 billion in the acquisition and development of crude oil and natural gas properties.
The following table summarizes our operating expenses for the periods indicated (in thousands, except per Boe amounts): Year Ended December 31, 2023 2022 Change Percent Change Operating Expenses: Lease operating expense $ 301,288 $ 169,986 $ 131,302 77 % Midstream operating expense 45,080 31,944 13,136 41 % Gathering, transportation, and processing 290,645 287,474 3,171 1 % Severance and ad valorem taxes 276,535 305,701 (29,166) (10) % Exploration 2,178 6,981 (4,803) (69) % Depreciation, depletion, and amortization 1,171,192 816,446 354,746 43 % Abandonment and impairment of unproved properties — 17,975 (17,975) (100) % Transaction costs 84,328 24,683 59,645 242 % General and administrative expense 161,077 143,477 17,600 12 % Other operating expense 7,437 2,691 4,746 176 % Total operating expenses $ 2,339,760 $ 1,807,358 $ 532,402 29 % Selected Operating Expenses (per Boe): Lease operating expense $ 3.89 $ 2.74 $ 1.15 42 % Midstream operating expense (1) 0.58 0.51 0.07 14 % Gathering, transportation, and processing 3.75 4.63 (0.88) (19) % Severance and ad valorem taxes 3.57 4.93 (1.36) (28) % Depreciation, depletion, and amortization 15.13 13.16 1.97 15 % Transaction costs 1.09 0.40 0.69 173 % General and administrative expense 2.08 2.31 (0.23) (10) % Total selected operating expenses (per Boe) $ 30.09 $ 28.68 $ 1.41 5 % _____________________________ (1) Our midstream assets relate entirely to our DJ Basin operations.
The following table summarizes our operating expenses for the periods indicated (in thousands, except per Boe amounts): Year Ended December 31, 2024 2023 Change Percent Change Operating Expenses: Lease operating expense $ 577,837 $ 301,288 $ 276,549 92 % Midstream operating expense 48,038 45,080 2,958 7 % Gathering, transportation, and processing 377,678 290,645 87,033 30 % Severance and ad valorem taxes 377,388 276,535 100,853 36 % Exploration 14,322 2,178 12,144 ** Depreciation, depletion, and amortization 2,056,427 1,171,192 885,235 76 % Transaction costs 31,419 84,328 (52,909) (63) % General and administrative expense 226,965 161,077 65,888 41 % Other operating expense 17,330 7,437 9,893 133 % Total operating expenses $ 3,727,404 $ 2,339,760 $ 1,387,644 59 % Selected Operating Expenses (per Boe): Lease operating expense $ 4.58 $ 3.89 $ 0.69 18 % Midstream operating expense (1) 0.38 0.58 (0.20) (34) % Gathering, transportation, and processing 2.99 3.75 (0.76) (20) % Severance and ad valorem taxes 2.99 3.57 (0.58) (16) % Depreciation, depletion, and amortization 16.30 15.13 1.17 8 % Transaction costs 0.25 1.09 (0.84) (77) % General and administrative expense 1.80 2.08 (0.28) (13) % Total selected operating expenses (per Boe) $ 29.29 $ 30.09 $ (0.80) (3) % _____________________________ ** Percent not meaningful (1) Our midstream assets predominantly relate to our DJ Basin operations.
We periodically enter into natural gas basis protection swaps to mitigate a portion of our exposure to adverse market changes. Outlook Our 2024 capital investments in drilling, completions, land, and midstream, which we expect to be between $1.8 billion to $2.1 billion, are focused on the continued execution of our development plans in the DJ Basin and Permian Basin.
Financial Statements and Supplementary Data - Note 9 - Derivatives for further discussion on our derivative contracts. Outlook Our 2025 capital investments in drilling, completions, and midstream, which we expect to be between $1.8 billion to $1.9 billion, are focused on the continued execution of our development plans in the DJ Basin and Permian Basin.
Our income tax expense for the years ended December 31, 2023 and 2022 was $215.2 million and $405.7 million, resulting in an effective tax rate of 21.5% and 24.5% on pre-tax income, respectively.
Refer to “ Item 8. Financial Statements and Supplementary Data - Note 12 - Income Taxes” for additional discussion. Our income tax expense for the years ended December 31, 2024 and 2023 was $244.0 million and $215.2 million, resulting in an effective tax rate of 22.5% and 21.5%, respectively, on income from operations before income taxes.
Please refer to the “ Reconciliation of Free Cash Flow to Cash Provided by Operating Activities ” and “ Liquidity and Capital Resources ” for additional discussion. 2023 Transactions and Operations On August 2, 2023, we closed on the Hibernia Acquisition and the Tap Rock Acquisition.
Refer to “ Non-GAAP Financial Measures - Reconciliation of Adjusted Free Cash Flow to Cash Provided by Operating Activities ” and “ Liquidity and Capital Resources ” below for additional discussion. 2024 Transaction and Operations On January 2, 2024, we completed the acquisition of certain crude oil and natural gas assets from Vencer.
Our lease operating expense increased 77% to $301.3 million for the year ended December 31, 2023 from $170.0 million for the year ended December 31, 2022, and increased 42% on an equivalent basis per Boe.
Lease operating expense increased 92%, to $577.8 million for the year ended December 31, 2024, from $301.3 million for the year ended December 31, 2023, and increased 18% on an equivalent basis per Boe. The increase in lease operating expense was primarily the result of the Tap Rock, Hibernia, and Vencer acquisitions in the Permian Basin.
We have operational flexibility to control the pace of our capital spending and we regularly monitor external factors that may negatively impact it. We may revise our capital program during the year as a result of this. Our 2024 capital program allocates approximately 60% to the Permian Basin, which includes drilling and completing 130 to 150 gross operated wells.
We have operational flexibility to control the pace of our capital spending and we regularly monitor external factors that may negatively impact it.
Financial Statements and Supplementary Data - Note 5 - Long-Term Debt ” for additional information. 72 Table of Contents Our material short-term cash requirements include: consideration for the Vencer Acquisition, operating activities, working capital requirements, capital expenditures, dividends, and payments of contractual obligations.
Our material short-term cash requirements include: operating activities, working capital requirements, capital expenditures, dividends, and payments of contractual obligations, including the payment of the remaining portion of the deferred consideration due with respect to the Vencer Acquisition.
Commodity prices continue to be impacted by various macro-economic factors influencing the balance of supply and demand.
Commodity prices in 2024 continued to be impacted by various macro-economic factors influencing the balance of supply and demand. From January through April 2024, pricing for crude oil rebounded when compared to declining pricing in the fourth quarter of 2023.
The Credit Facility contains customary representations and various affirmative and negative covenants as well as certain financial covenants, including (a) a maximum ratio of our consolidated indebtedness to earnings before interest, income taxes, depreciation, depletion, and amortization, exploration expense, and other non-cash charges (“permitted net leverage ratio”) of 3.00 to 1.00 and (b) a current ratio, inclusive of the unused commitments then available to be borrowed, to not be less than 1.00 to 1.00.
The Credit Facility contains customary representations and various affirmative and negative covenants as well as certain financial covenants, including (a) a permitted net leverage ratio of not greater than 3.00 to 1.00, (b) a current ratio, inclusive of the unused commitments under the Credit Facility then available to be borrowed, of not less than 1.00 to 1.00, and (c) upon the achievement of investment grade credit ratings, a PV-9 coverage ratio of the net present value, discounted at 9% per annum, of the estimated future net revenues expected in the proved reserves to our total net indebtedness of not less than 1.50 to 1.00 (“PV-9 Coverage Ratio”).

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

11 edited+1 added−1 removed10 unchanged
Biggest changeFinancial Statements and Supplementary Data - Note 9 - Derivatives ” for summary derivative activity tables. Interest Rates As of December 31, 2023, we had a $750.0 million balance on our Credit Facility. As of the filing date of this report, we had a $400.0 million balance on our Credit Facility.
Biggest changeFinancial Statements and Supplementary Data - Note 9 - Derivatives ” for summary derivative activity tables. Interest Rates As of December 31, 2024 and February 21, 2025, we had $450.0 million and $800.0 million, respectively, outstanding under our Credit Facility.
We are also subject to credit risk due to concentration of our crude oil and natural gas receivables with certain significant customers. The inability or failure of our significant customers to meet their obligations to us or their insolvency or liquidation may adversely affect our financial results.
We are also subject to credit risk due to the concentration of our crude oil and natural gas receivables with certain significant customers. The inability or failure of our significant customers to meet their obligations to us or their insolvency or liquidation may adversely affect our financial results.
Factors influencing crude oil and natural gas prices include the level of global demand for crude oil and natural gas, the global supply of crude oil and natural gas, the establishment of and compliance with production quotas by crude oil exporting countries, weather conditions which determine the demand for natural gas, the price and availability of alternative fuels, local and global politics, and overall economic conditions.
Factors influencing crude oil and natural gas prices include the level of global demand for crude oil and natural gas, the global supply of crude oil and natural gas, the establishment of and compliance with production quotas by crude oil exporting countries, weather conditions which impact the supply and demand for crude oil and natural gas, the price and availability of alternative fuels, local and global politics, and overall economic conditions.
We review the credit rating, payment history, and financial resources of our customers, but we do not require our customers to post collateral. Our allowances for credit losses were insignificant as of December 31, 2023.
We review the credit rating, payment history, and financial resources of our customers, but we do not require our customers to post collateral. Our allowances for credit losses were insignificant as of December 31, 2024.
Borrowings under our Credit Facility bear interest at a fluctuating rate that is tied to an Alternate Base Rate or Secured Overnight Financing Rate, at our option. Any increases in these interest rates can have an adverse impact on our results of operations and cash flows.
Borrowings under our Credit Facility bear interest at a fluctuating rate that is tied to, at our option, the Alternate Base Rate (“ABR”) or Secured Overnight Financing Rate (“SOFR”), plus the applicable margin. Any increases in these interest rates can have an adverse impact on our results of operations and cash flows.
If a substantial amount of our production is interrupted at the same time, it could adversely affect our cash flow. 80 Table of Contents
If a substantial amount of our production is interrupted at the same time, it could adversely affect our cash flow. 78
If crude oil and natural gas SEC prices increased by 10%, our proved reserve volumes would increase by 2% and our PV-10 value as of December 31, 2023 would increase by approximately 18% or $1.7 billion. PV-10 is a non-GAAP financial measure. Please refer to “ Item 7.
If crude oil and natural gas SEC prices increased by 10%, our proved reserve volumes would increase by 3% and our PV-10 value as of December 31, 2024 would increase by approximately 20% or $1.8 billion. 77 PV-10 is a non-GAAP financial measure. Refer to “ Item 7.
As of December 31, 2023, and the filing date of this report, our derivative contracts have been executed with 15 counterparties, all of which are members of the Credit Facility lender group and have investment grade credit ratings. However, if our counterparties fail to perform their obligations under the contracts, we could suffer financial loss.
As of December 31, 2024 and February 21, 2025, our derivative contracts have been executed with 16 counterparties, all of which are members of the Credit Facility lender group and have investment grade credit ratings. However, if our counterparties fail to perform their obligations under the contracts, we could suffer financial loss.
If crude oil and natural gas SEC prices declined by 10%, our proved reserve volumes would decrease by 3% and our PV-10 value as of December 31, 2023 would decrease by approximately 18% or $1.6 billion.
If crude oil and natural gas SEC prices declined by 10%, our proved reserve volumes would decrease by 4% and our PV-10 value as of December 31, 2024 would decrease by approximately 19% or $1.8 billion.
For the derivatives outstanding at December 31, 2023, a hypothetical upward or downward shift of 10% in the forward curve for the related indices would decrease our derivative gain by $81.1 million or increase it by $82.3 million, respectively. Please refer to “ Item 8.
For the derivatives outstanding as of December 31, 2024, a hypothetical upward or downward shift of 10% in the forward curve for the related indices would decrease our derivative gain by $86.7 million or increase it by $183.4 million, respectively. Refer to “ Item 8.
As of December 31, 2023 and through the filing date of this report, we were in compliance with all financial and non-financial covenants under the Credit Facility. 79 Table of Contents Counterparty and Customer Credit Risk In connection with our derivative activities, we have exposure to financial institutions in the form of derivative transactions.
As of December 31, 2024, and through the filing date of this Annual Report on Form 10-K, we were in compliance with all financial and non-financial covenants under the Credit Facility. Counterparty and Customer Credit Risk We are exposed to counterparty credit risk associated with our derivative activities.
Removed
We periodically enter into derivative contracts for crude oil, natural gas, and NGL using NYMEX futures or over-the-counter derivative financial instruments. The types of derivative instruments that we use include swaps, collars, basis protection swaps, and puts.
Added
We periodically enter into commodity derivative contracts to mitigate a portion of our exposure to potentially adverse market changes in commodity prices for our expected future crude oil and natural gas production and the associated impact on cash flows. Our commodity derivative contracts consist of swaps, collars, and basis protection swaps.

Other CIVI 10-K year-over-year comparisons