Diversified Energy Co (DEC) Risk Factors

Item 1A. Risk Factors

You should carefully consider the risks described below, together with all of the other information in this Annual Report on Form 10-

K. The risks and uncertainties below are not the only ones we face. Additional risks and uncertainties not presently known to us or that

we believe to be immaterial may also adversely affect our business. If any of the following risks occur, our business, financial

condition, and results of operations could be seriously harmed and you could lose all or part of your investment. This Annual Report

on Form 10-K also contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially

from those anticipated in these forward-looking statements as a result of various factors, including the risks described below and

elsewhere in this Annual Report on Form 10-K.

Summary of Risk Factors

We are subject to a variety of risks and uncertainties which could have a material adverse effect on our business, financial condition,

and results of operations. The summary below is not exhaustive and is qualified by reference to the full set of risk factors set forth in

this “Risk Factors” section.

•Volatility and future changes in natural gas, NGLs and oil prices could materially and adversely affect our business, results of

operations, financial condition, cash flows or prospects.

•We face production risks and hazards that may affect our ability to produce natural gas, NGLs and oil at expected levels, quality

and costs that may result in additional liabilities to us.

•The levels of our natural gas and oil reserves and resources and their quality and production volumes may be lower than estimated

or expected.

•PV-10 will not necessarily be the same as the current market value of our estimated natural gas, NGL and oil reserves.

•We may face unanticipated increased or incremental costs in connection with decommissioning obligations such as plugging.

•We may not be able to keep pace with technological developments in our industry or be able to implement them effectively.

•Deterioration in the economic conditions in any of the industries in which our customers operate, a domestic or worldwide

financial downturn, or negative credit market conditions could have a material adverse effect on our liquidity, results of

operations, business and financial condition that we cannot predict.

•Our operations are subject to a series of risks relating to weather events.

•We rely on third-party infrastructure that we do not control and/or are subject to tariff charges that we do not control.

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•Failure by us, our contractors or our primary offtakers to obtain access to necessary equipment and transportation systems could

materially and adversely affect our business, results of operations, financial condition, cash flows or prospects.

•A proportion of our equipment has substantial prior use and significant expenditure may be required to maintain operability and

operations integrity.

•We depend on our directors, key members of management, independent experts, and technical and operational service providers

and on our ability to retain and hire such persons to effectively manage our growing business.

•We may face unanticipated water and other waste disposal costs.

•We may incur significant costs and liabilities resulting from performance of pipeline integrity programs and related repairs.

•Inflation may adversely affect us by increasing costs beyond what we can recover through price increases and limit our ability to

enter into future debt financing.

•There are risks inherent in our acquisitions of natural gas and oil assets.

•We may not have good title to all our assets and licenses.

•Restrictions in our existing and future debt agreements could limit our growth and our ability to engage in certain activities.

•The securitizations of our limited purpose, bankruptcy-remote, wholly owned subsidiaries may expose us to financing and other

risks, and there can be no assurance that we will be able to access the securitization market in the future, which may require us to

seek more costly financing.

•We are subject to regulation and liability under environmental, health and safety regulations, the violation of which may affect our

financial condition and operations.

•Our operations are dependent on our compliance with obligations under permits, licenses, contracts and field development plans.

•Our internal systems and website may be subject to intentional and unintentional disruption, and our confidential information may

be misappropriated, stolen or misused, which could adversely impact our reputation and future sales.

•Our operations are subject to the risk of litigation.

•Failure to comply with requirements to design, implement and maintain effective internal control over financial reporting could

have a material adverse effect on our business.

•We are subject to certain tax risks, including changes in tax legislation in the United States.

Risks Related to Our Business, Operations and Industry

Volatility and future changes in natural gas, NGLs and oil prices could materially and adversely affect our business, results of

operations, financial condition, cash flows or prospects.

Our business, results of operations, financial condition, cash flows or prospects depend substantially upon prevailing natural gas, NGL

and oil prices, which may be adversely impacted by unfavorable global, regional and national macroeconomic conditions, including

but not limited to instability related to the military conflicts in Ukraine and the Middle East. Natural gas, NGLs and oil are

commodities for which prices are determined based on global and regional demand, supply and other factors, all of which are beyond

our control.

Historically, prices for natural gas, NGLs and oil have fluctuated widely for many reasons, including:

•Global and regional supply and demand, and expectations regarding future supply and demand, for gas and oil products;

•Global and regional economic conditions;

•Evolution of stocks of oil and related products;

•Increased production due to new extraction developments and improved extraction and production methods;

•Geopolitical uncertainty;

•Threats or acts of terrorism, war or threat of war, which may affect supply, transportation or demand;

•Weather events, natural disasters and environmental incidents;

•Access to pipelines, storage platforms, shipping vessels and other means of transporting, storing and refining gas and oil,

including without limitation, changes in availability of, and access to, pipeline ullage;

•Prices and availability of alternative fuels;

•Prices and availability of new technologies affecting energy consumption;

•Increasing competition from alternative energy sources;

•The ability of OPEC and other oil-producing nations, to set and maintain specified levels of production and prices;

•Political, economic and military developments in gas and oil producing regions generally;

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•Governmental regulations and actions, including the imposition of tariffs, export restrictions and taxes and environmental

requirements and restrictions as well as anti-hydrocarbon production policies;

•Trading activities by market participants and others either seeking to secure access to natural gas, NGLs and oil or to hedge

against commercial risks, or as part of an investment portfolio; and

•Market uncertainty, including fluctuations in currency exchange rates, and speculative activities by those who buy and sell natural

gas, NGLs and oil on the world markets.

It is impossible to accurately predict future gas, NGL and oil price movements. Historically, natural gas prices have been highly

volatile and subject to large fluctuations in response to relatively minor changes in the demand for natural gas.

The economics of producing from some wells and assets may also result in a reduction in the volumes of our reserves which can be

produced commercially, resulting in decreases to our reported reserves. Additionally, further reductions in commodity prices may

result in a reduction in the volumes of our reserves. We might also elect not to continue production from certain wells at lower prices,

or our license partners may not want to continue production regardless of our position.

Each of these factors could result in a material decrease in the value of our reserves, which could lead to a reduction in our natural gas,

NGLs and oil development activities and acquisition of additional reserves. In addition, certain development projects or potential

future acquisitions could become unprofitable as a result of a decline in prices and could result in us postponing or canceling a planned

project or potential acquisition, or if it is not possible to cancel, to carry out the project or acquisition with negative economic impacts.

Further, a reduction in natural gas, NGL or oil prices may lead our producing fields to be shut in and to be entered into the

decommissioning phase earlier than estimated.

Our revenues, cash flows, operating results, profitability, dividends, future rate of growth and the carrying value of our gas and oil

properties depend heavily on the prices we receive for natural gas, NGLs and oil sales. Commodity prices also affect our cash flows

available for capital investments and other items, including the amount and value of our gas and oil reserves. In addition, we may face

gas and oil property impairments if prices fall significantly. In light of the continuing increase in supply coming from the Utica and

Marcellus shale plays of the Appalachian Basin, no assurance can be given that commodity prices will remain at levels which enable us

to do business profitably or at levels that make it economically viable to produce from certain wells and any material decline in such

prices could result in a reduction of our net production volumes and revenue and a decrease in the valuation of our production

properties, which could negatively impact our business, results of operations, financial condition, cash flows or prospects.

We conduct our business in a highly competitive industry.

The gas and oil industry is highly competitive. The key areas in which we face competition include:

•Engagement of third-party service providers whose capacity to provide key services may be limited;

•Acquisition of other companies that may already own licenses or existing producing assets;

•Acquisition of assets offered for sale by other companies;

•Access to capital (debt and equity) for financing and operational purposes;

•Purchasing, leasing, hiring, chartering or other procuring of equipment that may be scarce; and

•Employment of qualified and experienced skilled management and gas and oil professionals and field operations personnel.

Competition in our markets is intense and depends, among other things, on the number of competitors in the market, their financial

resources, their degree of geological, geophysical, engineering and management expertise and capabilities, their degree of vertical

integration and pricing policies, their ability to develop properties on time and on budget, their ability to select, acquire and develop

reserves and their ability to foster and maintain relationships with the relevant authorities. The cost to attract and retain qualified and

experienced personnel has increased and may increase substantially in the future.

Our competitors also include those entities with greater technical, physical and financial resources than us. Finally, companies and

certain private equity firms not previously investing in natural gas and oil may choose to acquire reserves to establish a firm supply or

simply as an investment. Any such companies will also increase market competition which may directly affect us.

If we are unsuccessful in competing against other companies, our business, results of operations, financial condition, cash flows or

prospects could be materially adversely affected.

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We may experience delays in production, transportation and marketing.

Various production, transportation and marketing conditions may cause delays in natural gas, NGLs and oil production and adversely

affect our business. For example, the gas gathering systems that we own connect to other pipelines or facilities which are owned and

operated by third parties. These pipelines and other midstream facilities and others upon which we rely may become unavailable

because of testing, turnarounds, line repair, reduced operating pressure, lack of operating capacity, regulatory requirements,

curtailments of receipt or deliveries due to insufficient capacity or because of damage. Our largest processor of NGLs is the MarkWest

Energy Partners, L.P. (“MarkWest”) plant located in Langley, Kentucky. If we were to lose the ability to process NGLs at MarkWest’s

plant during a period of high pricing, our revenues would be negatively impacted. As a short-term measure, we could divert the natural

gas through other pipeline routes; however, certain pipeline operators would eventually decline to transport the gas due to its liquid

content at a level that would exceed tariff specifications for those pipelines. The lack of available capacity on third-party systems and

facilities could reduce the price offered for our production or result in the shut-in of producing wells. Any significant changes

affecting these infrastructure systems and facilities, as well as any delays in constructing new infrastructure systems and facilities,

could delay our production, which could negatively impact our business, results of operations, financial condition, cash flows or

prospects.

We face production risks and hazards that may affect our ability to produce natural gas, NGLs and oil at expected levels,

quality and costs that may result in additional liabilities to us.

Our natural gas and oil production operations are subject to numerous risks common to our industry, including, but not limited to,

premature decline of reservoirs, incorrect production estimates, invasion of water into producing formations, geological uncertainties

such as unusual or unexpected rock formations and abnormal geological pressures, low permeability of reservoirs, contamination of

natural gas and oil, blowouts, oil and other chemical spills, explosions, fires, equipment damage or failure, challenges relating to

transportation, pipeline infrastructure, natural disasters, uncontrollable flows of oil, natural gas or well fluids, adverse weather

conditions, shortages of skilled labor, delays in obtaining regulatory approvals or consents, pollution and other environmental risks.

If any of the above events occur, environmental damage, including biodiversity loss or habitat destruction, injury to persons or

property and other species and organisms, loss of life, failure to produce natural gas, NGLs and oil in commercial quantities or an

inability to fully produce discovered reserves could result. These events could also cause substantial damage to our property or the

property of others and our reputation and put at risk some or all of our interests in licenses, which enable us to produce, and could

result in the incurrence of fines or penalties, criminal sanctions potentially being enforced against us and our management, as well as

other governmental and third-party claims. Consequent production delays and declines from normal field operating conditions and

other adverse actions taken by third parties may result in revenue and cash flow levels being adversely affected.

Moreover, should any of these risks materialize, we could incur legal defense costs, remedial costs and substantial losses, including

those due to injury or loss of life, human health risks, severe damage to or destruction of property, natural resources and equipment,

environmental damage, unplanned production outages, clean-up responsibilities, regulatory investigations and penalties, increased

public interest in our operational performance and suspension of operations, which could negatively impact our business, results of

operations, financial condition, cash flows or prospects.

The levels of our natural gas and oil reserves and resources, their quality and production volumes may be lower than

estimated or expected.

The reserves data as of December 31, 2025, 2024 and 2023 contained in this Annual Report on Form 10-K has been audited by NSAI

unless stated otherwise. The standards utilized to prepare the reserves information may be different from the standards of reporting

adopted in other jurisdictions. Investors, therefore, should not assume that our reserves information as set forth in this Annual Report

on Form 10-K is directly comparable to similar information that has been prepared in accordance with the reserve reporting standards

of other jurisdictions.

In general, estimates of economically recoverable natural gas, NGLs and oil reserves are based on a number of factors and

assumptions made as of the date on which the reserves estimates were determined, such as geological, geophysical and engineering

estimates (which have inherent uncertainties), historical production from the properties or analogous reserves, the assumed effects of

regulation by governmental agencies and estimates of future commodity prices, operating costs, gathering and transportation costs and

production related taxes, all of which may vary considerably from actual results.

Underground accumulations of hydrocarbons cannot be measured in an exact manner and estimates thereof are a subjective process

aimed at understanding the statistical probabilities of recovery. Estimates of the quantity of economically recoverable natural gas and

oil reserves, rates of production and, where applicable, the timing of development expenditures depend upon several variables and

assumptions.

Many of the factors in respect of which assumptions are made when estimating reserves are beyond our control and therefore these

estimates may prove to be incorrect over time. Evaluations of reserves necessarily involve multiple uncertainties. The accuracy of any

reserves evaluation depends on the quality of available information and natural gas, NGLs and oil engineering and geological

interpretation. Interpretation, testing and production after the date of the estimates may require substantial upward or downward

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revisions in our reserves and resources data. Moreover, different reserves engineers may make different estimates of reserves and cash

flows based on the same available data. Actual production, revenues and expenditures with respect to reserves will vary from

estimates and the variances may be material.

If the assumptions upon which the estimates of our natural gas and oil reserves prove to be incorrect or if the actual reserves available

to us (or the operator of an asset in we have an interest) are otherwise less than the current estimates or of lesser quality than expected,

we may be unable to recover and produce the estimated levels or quality of natural gas, NGLs or oil set out in this document and this

may materially and adversely affect our business, results of operations, financial condition, cash flows or prospects.

The PV-10 of our reserves will not necessarily be the same as the current market value of our estimated natural gas, NGL and

oil reserves.

You should not assume that the present value of future net cash flows from our reserves is the current market value of our estimated

natural gas, NGL and oil reserves. Actual future net cash flows from our natural gas and oil properties will be affected by factors such

as:

•Actual prices we receive for natural gas, NGL and oil;

•Actual cost of development and production expenditures;

•The amount and timing of actual production;

•Transportation and processing; and

•Changes in governmental regulations or taxation.

The timing of both our production and our incurrence of expenses in connection with the development and production of our natural

gas and oil properties will affect the timing and amount of actual future net cash flows from reserves, and thus their actual present

value. In addition, the 10% discount factor we use when calculating discounted future net cash flows may not be the most appropriate

discount factor based on interest rates in effect from time to time and risks associated with us or the natural gas and oil industry in

general. Actual future prices and costs may differ materially from those used in the present value estimate.

We may face unanticipated increased or incremental costs in connection with decommissioning obligations such as plugging.

In the future, we may become responsible for costs associated with abandoning and reclaiming wells, facilities and pipelines which we use

for the processing of natural gas and oil reserves. With regards to plugging, we are party to agreements with regulators in the states of

Ohio, West Virginia, Kentucky and Pennsylvania, four of our largest wellbore states, setting forth plugging and abandonment schedules

spanning a period ranging from 10 to 100 years. We will incur such decommissioning costs at the end of the operating life of some of our

properties or in the future period that wells are scheduled to be plugged. The ultimate decommissioning costs are uncertain and cost

estimates can vary in response to many factors including changes to relevant legal requirements, the emergence of new restoration

techniques, the shortage of plugging vendors, difficult terrain or weather conditions or experience at other well locations. The expected

timing and amount of expenditure can also change, for example, in response to changes in reserves, wells losing commercial viability

sooner than forecasted or changes in laws and regulations or their interpretation. As a result, there could be significant adjustments to the

provisions established which would affect future financial results. The use of other funds to satisfy such decommissioning costs may

impair our ability to focus capital investment in other areas of our business, which could materially and adversely affect our business,

results of operations, financial condition, cash flows or prospects.

We may not be able to keep pace with technological developments in our industry or be able to implement them effectively.

The natural gas and oil industry is characterized by rapid and significant technological advancements and introductions of new

products and services using new technologies, such as emissions controls and processing technologies. Rapid technological

advancements in information technology and operational technology domains require seamless integration. Failure to integrate these

technologies efficiently may result in operational inefficiencies, security vulnerabilities, and increased costs. During mergers and

acquisitions, integrating technology assets from acquired companies can be complex. Poor integration may lead to data

inconsistencies, security gaps and operational disruptions. Technology systems are also susceptible to cybersecurity threats, including

malware, denial-of-service attacks, data breaches, hacking, social engineering or "phishing", deepfake attacks, computer viruses,

employee or insider threats, malfeasance, supply chain attacks, physical breaches, vendor email compromise, payment fraud, and

ransomware attacks. These threats may disrupt operations, compromise sensitive data and lead to significant financial losses. Further,

inefficient data management practices may result in data breaches, data loss and missed opportunities for operational insights. The

presence of legacy technology systems can also pose challenges, as they may lack modern security features, making them vulnerable

to cyber threats and necessitating costly upgrades. As others use or develop new technologies (including technologies related to

artificial intelligence), we may be placed at a competitive disadvantage or may be forced by competitive pressures to implement those

new technologies at substantial costs. In addition, other natural gas and oil companies may have greater financial, technical and

personnel resources that allow them to enjoy technological advantages, which may in the future allow them to implement new

technologies before we can. Additionally, reliance on global supply chains for information technology hardware, software and

operational technology equipment exposes the industry to supply chain disruptions, shortages and cybersecurity risks.

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Our operations are subject to a series of risks relating to weather events.

Continued public concern regarding weather events and potential mitigation through regulation could have a material impact on our

business. International agreements, national, regional, state and local legislation, and regulatory measures to limit GHG emissions or

mandate related disclosures are currently in place or in various stages of discussion or implementation. Given that some of our

operations are associated with emissions of GHGs, these and other GHG emissions-related laws, policies and regulations may result in

substantial capital, compliance, operating and maintenance costs. The level of expenditure required to comply with these laws and

regulations is uncertain and is expected to vary depending on the laws enacted by particular countries, states, provinces and

municipalities.

Additionally, regulatory, market and other changes to respond to weather events may adversely impact our business, financial

condition or results of operations. Reporting expectations are also increasing, with a variety of customers, capital providers and

regulators seeking increased information on weather-related risks. For example, U.S. states have adopted or proposed weather-related

disclosures rules that may require us to incur significant costs to assess and disclose on a range of weather-related data and risks.

Internationally, the United Nations-sponsored “Paris Agreement” requires member nations to individually determine and submit non-

binding emissions reduction targets every five years after 2020. In November 2021, the international community gathered in Glasgow

at the 26th Conference of the Parties to the UN Framework Convention on Climate Change, during which multiple announcements

were made, including a call for parties to eliminate certain natural gas and oil subsidies and pursue further action on non-carbon

dioxide GHGs. Relatedly, the United States and European Union jointly announced the launch of the “Global Methane Pledge,” which

aims to cut global methane pollution at least 30% by 2030 relative to 2020 levels, including “all feasible reductions” in the energy

sector. Such commitments were re-affirmed at the 27th Conference of the Parties in Sharm El Sheikh. However, on January 20, 2025,

President Trump issued an Executive Order directing the U.S. Ambassador to the United Nations to withdraw from the Paris

Agreement. Accordingly, the UN Secretary General issued a depositary notification of the U.S. withdrawal from the Paris Agreement,

effective January 27, 2026. More recently, in February 2026, the U.S. Environmental Protection Agency rescinded its prior finding

that certain GHG emissions endangered public health and welfare, which had served as the basis for certain GHG emission regulation

by the agency. This, and other changes undertaken by the Trump Administration have or may in the future reverse or rescind weather-

related initiatives and regulations and focus on driving increased U.S. energy production. The emission reduction targets and other

provisions of legislative or regulatory initiatives and policies enacted in the future by the states in which we operate, could adversely

impact our business by imposing increased costs in the form of higher taxes or increases in the prices of emission allowances, limiting

our ability to develop new gas and oil reserves, transport hydrocarbons through pipelines or other methods to market, decreasing the

value of our assets, or reducing the demand for hydrocarbons and refined petroleum products. With increased pressure to reduce GHG

emissions by replacing natural gas and oil energy generation with alternative energy generation, it is possible that peak demand for gas

and oil will be reached, and gas and oil prices will be adversely impacted as and when this happens. Further, the consequences of the

effects of global weather events and patterns, and the continued political and societal attention afforded to mitigating the effects of

weather events and patterns, may generate adverse investor and stakeholder sentiment towards the hydrocarbon industry and

negatively impact the ability to invest in the sector. Similarly, longer term reduction in the demand for hydrocarbon products due to

the pace of commercial deployment of alternative energy technologies or due to shifts in consumer preference for lower GHG

emissions products could reduce the demand for the hydrocarbons that we produce.

Further, in response to concerns related to weather events, companies in the natural gas and oil sector may be exposed to increasing

financial risks. Financial institutions, including investment advisors and certain sovereign wealth, pension and endowment funds, may

elect in the future to shift some or all of their investment into non-natural gas and oil related sectors. Institutional lenders who provide

financing to fossil-fuel energy companies have also become more attentive to sustainable lending practices, and some of them may elect

in the future not to provide funding for natural gas and oil energy companies. A material reduction in the capital available to the natural

gas and oil industry could make it more difficult to secure funding for exploration, development, production, and transportation activities,

which could in turn negatively affect our operations.

The Company may also be subject to activism from environmental non-governmental organizations (“NGOs”) campaigning against

natural gas and oil extraction or negative publicity from media alleging inadequate remedial actions to retire non-producing wells

effectively, which could affect our reputation, disrupt our programs, require us to incur significant, unplanned expense to respond or react

to intentionally disruptive campaigns or media reports, create blockades to interfere with operations or otherwise negatively impact our

business, results of operations, financial condition, cash flows or prospects. Litigation risks are also increasing as a number of entities

have sought to bring suit against various oil and natural gas companies in state or federal court, alleging among other things, that such

companies created public nuisances by producing fuels that contributed to weather events or alleging that the companies have been aware

of the adverse effects of weather events and patterns for some time.

Finally, our operations are subject to disruption from the physical effects that may be caused or aggravated by weather events. These

include risks from extreme weather events, such as hurricanes, severe storms, floods, heat waves, and ambient temperature increases,

as well as wildfires.

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We rely on third-party infrastructure that we do not control and/or, in each case, are subject to tariff charges that we do not

control.

A significant portion of our production passes through third-party owned and controlled infrastructure. If these third-party pipelines or

liquids processing facilities experience any event that causes an interruption in operations or a shut-down such as mechanical problems,

an explosion, adverse weather conditions, a terrorist attack or labor dispute, our ability to produce or transport natural gas could be

severely affected. For example, we have an agreement with a third-party where approximately 28% of the NGLs we sold during the

year ending December 31, 2025 were processed at the third-party’s facility in Kentucky. Any material decreases in our ability to

process or transport our natural gas through third-party infrastructure could have a material adverse effect on our business, results of

operations, financial condition, cash flows or prospects.

Our use of third-party infrastructure may be subject to tariff charges. Although we seek to manage our flow via our midstream

infrastructure, we may not always be able to avoid higher tariffs or basis blowouts due to the lack of interconnections. In such instances,

the tariff charges can be substantial and the cost is not subject to our direct control, although we may have certain contractual or

governmental protections and rights. Generally, the operator of the gathering or transmission pipelines sets these tariffs and expenses on a

cost sharing basis according to our proportionate hydrocarbon through-put of that facility. A provisional tariff rate is applied during the

relevant year and then finalized the following year based on the actual final costs and final through-put volumes. Such tariffs are

dependent on continued production from assets owned by third parties and, may be priced at such a level as to lead to production from

our assets ceasing to be economic and thus may have a material adverse effect on our business, results of operations, financial condition,

cash flows or prospects.

Furthermore, our use of third-party infrastructure exposes us to the possibility that such infrastructure will cease to be operational or

be decommissioned and therefore require us to source alternative export routes and/or prevent economic production from our assets.

This could also have a material adverse effect on our business, results of operations, financial condition, cash flows or prospects.

Failure by us, our contractors or our primary offtakers to obtain access to necessary equipment and transportation systems

could materially and adversely affect our business, results of operations, financial condition, cash flows or prospects.

We rely on our natural gas and oil field suppliers and contractors to provide materials and services that facilitate our production

activities, including plugging and abandonment contractors. Any competitive pressures on the oil field suppliers and contractors could

result in a material increase of costs for the materials and services required to conduct our business and operations. For example, we

are dependent on the availability of plugging vendors to help us satisfy abandonment schedules that we have agreed to with the states

of Ohio, West Virginia, Kentucky and Pennsylvania. Such personnel and services can be scarce and may not be readily available at the

times and places required. Future cost increases could have a material adverse effect on our asset retirement liability, operating

income, cash flows and borrowing capacity and may require a reduction in the carrying value of our properties, our planned level of

spending for development and the level of our reserves. Prices for the materials and services we depend on to conduct our business

may not be sustained at levels that enable us to operate profitably.

We and our offtakers rely, and any future offtakers will rely, upon the availability of pipeline and storage capacity systems, including

such infrastructure systems that are owned and operated by third parties. As a result, we may be unable to access or source alternatives

for the infrastructure and systems which we currently use or plan to use, or otherwise be subject to interruptions or delays in the

availability of infrastructure and systems necessary for the delivery of our natural gas, NGLs and oil to commercial markets. In

addition, such infrastructure may be close to its design life and decisions may be taken to decommission such infrastructure or perform

life extension work to maintain continued operations. Any of these events could result in disruptions to our projects and thereby

impact our ability to deliver natural gas, NGLs and oil to commercial markets and/or may increase our costs associated with the

production of natural gas, NGLs and oil reliant upon such infrastructure and systems. Further, our offtakers could become subject to

increased tariffs imposed by government regulators or the third-party operators or owners of the transportation systems available for

the transport of our natural gas, NGLs and oil, which could result in decreased offtaker demand and downward pricing pressure.

If we are unable to access infrastructure systems facilitating the delivery of our natural gas, NGLs and oil to commercial markets due

to our contractors or primary offtakers being unable to access the necessary equipment or transportation systems, our operations will

be adversely affected. If we are unable to source the most efficient and expedient infrastructure systems for our assets then delivery of

our natural gas, NGLs and oil to the commercial markets may be negatively impacted, as may our costs associated with the production

of natural gas, NGLs and oil reliant upon such infrastructure and systems.

A proportion of our equipment has substantial prior use and significant expenditure may be required to maintain operability

and operations integrity.

A part of our business strategy is to optimize or refurbish producing assets where possible to maximize the efficiency of our operations

while avoiding significant expenses associated with purchasing new equipment. Our producing assets and midstream infrastructure

require ongoing maintenance to ensure continued operational integrity. For example, some older wells may struggle to produce

suitable line pressure and will require the addition of compression to push natural gas. Despite our planned operating and capital

expenditures, there can be no guarantee that our assets or the assets we use will continue to operate without fault and not suffer

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material damage in this period through, for example, wear and tear, severe weather conditions, natural disasters or industrial accidents.

If our assets, or the assets we use, do not operate at or above expected efficiencies, we may be required to make substantial

expenditures beyond the amounts budgeted. Any material damage to these assets or significant capital expenditure on these assets for

improvement or maintenance may have a material adverse effect on our business, results of operations, financial condition, cash flows

or prospects. In addition, as with planned operating and capital expenditure, there is no guarantee that the amounts expended will

ensure continued operation without fault or address the effects of wear and tear, severe weather conditions, natural disasters or

industrial accidents. We cannot guarantee that such optimization or refurbishment will be commercially feasible to undertake in the

future and we cannot provide assurance that we will not face unexpected costs during the optimization or refurbishment process.

We depend on our directors, key members of management, independent experts, and technical and operational service

providers and on our ability to retain and hire such persons to effectively manage our growing business.

Our future operating results depend in significant part upon the continued contribution of our directors, key senior management and

technical, financial and operations personnel. Management of our growth will require, among other things, stringent control of

financial systems and operations, the continued development of our control environment, the ability to attract and retain sufficient

numbers of qualified management and other personnel, the continued training of such personnel and the presence of adequate

supervision.

In addition, the personal connections and relationships of our directors and key management are important to the conduct of our

business. If we were to unexpectedly lose a member of our key management or fail to maintain one of the strategic relationships of our

key management team, our business, results of operations, financial condition, cash flows or prospects could be materially adversely

affected. In particular, we are very dependent on our Chief Executive Officer, Robert Russell (“Rusty”) Hutson, Jr. Acquisitions are a

key part of our strategy, and Mr. Hutson has been instrumental in sourcing them and securing their financing. Furthermore, as our

founder, Mr. Hutson is strongly associated with our success, and if he were to cease being the Chief Executive Officer, perception of

our future prospects may be diminished.

Attracting and retaining additional skilled personnel will be fundamental to the continued growth and operation of our business. We

require skilled personnel in the areas of development, operations, engineering, business development, natural gas, NGLs and oil

marketing, finance and accounting relating to our projects. Personnel costs, including salaries, are increasing as industry wide demand

for suitably qualified personnel increases. We may not successfully attract new personnel and retain existing personnel required to

continue to expand our business and to successfully execute and implement our business strategy.

We may face unanticipated water and other waste disposal costs.

We may be subject to regulation that restricts our ability to discharge water produced as part of our natural gas, oil and NGL

production operations. Productive zones frequently contain water that must be removed for the natural gas, oil and NGL to produce,

and our ability to remove and dispose of sufficient quantities of water from the various zones will determine whether we can produce

natural gas, oil and NGL in commercial quantities. The produced water must be transported from the leasehold and/or injected into

disposal wells. The availability of disposal wells with sufficient capacity to receive all of the water produced from our wells may

affect our ability to produce our wells. Also, the cost to transport and dispose of that water, including the cost of complying with

regulations concerning water disposal, may reduce our profitability. We have entered into various water management services

agreements in the Appalachian Region which provide for the disposal of our produced water by established counterparties with large

integrated pipeline networks. If these counterparties fail to perform, we may have to shut in wells, reduce drilling activities, or upgrade

facilities for water handling or treatment. The costs to dispose of this produced water may increase for a number of reasons, including

if new laws and regulations require water to be disposed in a different manner.

In 2016, the EPA adopted effluent limitations for the treatment and discharge of wastewater resulting from onshore unconventional

natural gas, oil and NGL extraction facilities to publicly owned treatment works. In addition, the injection of fluids gathered from

natural gas, oil and NGL producing operations in underground disposal wells has been identified by some groups and regulators as a

potential cause of increased seismic events in certain areas of the country, including the states of West Virginia, Ohio and Kentucky in

the Appalachian Region as well as Oklahoma, Texas and Louisiana in our Central Region. Certain states, including those located in

the Appalachian Region have adopted, or are considering adopting, laws and regulations that may restrict or prohibit oilfield fluid

disposal in certain areas or underground disposal wells, and state agencies implementing those requirements may issue orders directing

certain wells in areas where seismic events have occurred to restrict or suspend disposal well permits or operations or impose certain

conditions related to disposal well construction, monitoring, or operations. Any of these developments could increase our cost to

dispose of our produced water.

We may incur significant costs and liabilities resulting from performance of pipeline integrity programs and related repairs.

Pursuant to the authority under the Natural Gas Pipeline Safety Act of 1968 (“NGPSA”) and Hazardous Liquid Pipeline Safety Act of

1979 (“HLPSA”), as amended by the Pipeline Safety Improvement Act of 2002 (“PSIA”), the Pipeline Inspection, Protection,

Enforcement and Safety Act of 2006 (“PIPESA”) and the Pipeline Safety, Regulatory Certainty, and Job Creation Act of 2011 (the

“2011 Pipeline Safety Act”), the PHMSA has promulgated regulations requiring pipeline operators to develop and implement integrity

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management programs for certain gas and hazardous liquid pipelines that, in the event of a pipeline leak or rupture could affect high

consequence areas (“HCAs”), which are areas where a release could have the most significant adverse consequences, including high-

population areas, certain drinking water sources and unusually sensitive ecological areas. These regulations require operators of

covered pipelines to:

•Perform ongoing assessments of pipeline integrity;

•Identify and characterize applicable threats to pipeline segments that could impact HCAs;

•Improve data collection, integration and analysis;

•Repair and remediate the pipeline as necessary; and

•Implement preventive and mitigating actions.

In addition, states have adopted regulations similar to existing PHMSA regulations for certain intrastate gas and hazardous liquid

pipelines. At this time, we cannot predict the ultimate cost of compliance with applicable pipeline integrity management regulations,

as the cost will vary significantly depending on the number and extent of any repairs found to be necessary as a result of pipeline

integrity testing, but the results of these tests could cause us to incur significant and unanticipated capital and operating expenditures

for repairs or upgrades deemed necessary to ensure the safe and reliable operation of our pipelines.

At this time, we cannot predict the cost of such requirements, but they could be significant. Moreover, federal and state legislative and

regulatory initiatives relating to pipeline safety that require the use of new or more stringent safety controls or result in more stringent

enforcement of applicable legal requirements could subject us to increased capital costs, operational delays and costs of operation.

Moreover as of January 2025, the maximum civil penalties PHMSA can impose are $272,926 per pipeline safety violation per day,

with a maximum of $2,729,245 for a related series of violations. The safety enhancement requirements and other provisions of the

2011 Pipeline Safety Act as well as any implementation of PHMSA regulations thereunder or any issuance or reinterpretation of

guidance by PHMSA or any state agencies with respect thereto could require us to install new or modified safety controls, pursue

additional capital projects or conduct maintenance programs on an accelerated basis, any or all of which tasks could result in our

incurring increased operating costs that could have a material adverse effect on our results of operations or financial position. States

are also pursuing regulatory programs intended to safely build pipeline infrastructure. The adoption of new or amended regulations by

PHMSA or the states that result in more stringent or costly pipeline integrity management or safety standards could have a significant

adverse effect on us and similarly situated midstream operators.

Risks Relating to Our Financing, Acquisitions, Investment and Indebtedness

Inflation may adversely affect us by increasing costs beyond what we can recover through price increases and limit our ability

to enter into future debt financing.

Inflation can adversely affect us by increasing costs of materials, equipment, labor and other services. In addition, inflation is often

accompanied by higher interest rates. Continued inflationary pressures could impact our profitability. Though we believe that the rates

of inflation in recent years, including the 12 months ended December 31, 2025, have not had a significant impact on our operations, a

continued increase in inflation, including inflationary pressure on labor, could result in increases to our operating costs, and we may be

unable to pass these costs on to our customers. These inflationary pressures could also adversely impact our ability to procure

materials and equipment in a cost-effective manner, which could result in reduced margins and production delays and, as a result, our

business, financial condition, results of operations and cash flows could be materially and adversely affected. We continue to

undertake actions and implement plans to address these inflationary pressures and protect the requisite access to materials and

equipment. With respect to our costs of capital, our ABS Notes (as defined in the Notes to the Consolidated Financial Statements) are

fixed-rate instruments (described in Note 15 in the Notes to the Consolidated Financial Statements) and as of February 25, 2026, we

had $243 million outstanding on our Credit Facility and $500 million of 9.75% senior secured bonds due 2029. Nevertheless, inflation

may also affect our ability to enter into future debt financing, including refinancing of our Credit Facility or issuing additional SPV-

level asset backed securities, as high inflation may result in a relative increase in the cost of debt capital.

We are taking efforts to mitigate inflationary pressures, by working closely with other suppliers and service providers to ensure

procurement of materials and equipment in a cost-effective manner. However, these mitigation efforts may not succeed or may be

insufficient.

Concerns about global economic growth have had a significant adverse impact on global financial markets and commodity prices. If

the economic climate in the United States or abroad deteriorates, worldwide demand for petroleum products could diminish further,

which could impact the price at which natural gas, NGLs and oil can be sold, which could affect our results of operations, financial

condition, cash flows and prospects.

There are risks inherent in our acquisitions of natural gas and oil assets.

Acquisitions are an essential part of our strategy for protecting and growing cash flow, particularly in relation to the risk that some of

our wells may have a higher than anticipated production decline rate. Over the past several years, we have undertaken a number of

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acquisitions of natural gas and oil assets (and of companies holding such assets). Our ability to complete future acquisitions will

depend on us being able to identify suitable acquisition candidates and negotiate favorable terms for their acquisition, in each case,

before any attractive candidates are purchased by other parties such as private equity firms, some of whom have substantially greater

financial and other resources than we do. We may face competition for attractive acquisition targets that may also increase the price of

the target business. As a result, there is no assurance that we will always be able to source and execute acquisitions in the future at

attractive valuations.

Furthermore, an acquisition in a new area in which we lack experience may present unanticipated risks and challenges that were not

accounted for or previously experienced. Ordinarily, our due diligence efforts are focused on higher valued and material properties or

assets. Even an in-depth review of all properties and records may not reveal all existing or potential problems, nor will such review

always permit a buyer to become sufficiently familiar with the properties to fully assess their deficiencies and capabilities. Generally,

physical inspections are not performed on every well or facility, and structural or environmental problems are not necessarily

observable even when an inspection is undertaken.

There can be no assurance that our prior acquisitions or any other potential acquisition will perform operationally as anticipated or be

profitable. We could fail to appropriately value any acquired business and the value of any business, company or property that we

acquire or invest in may actually be less than the amount paid for it or its estimated production capacity. We may be required to

assume pre-closing liabilities with respect to an acquisition, including known and unknown title, contractual, and environmental and

decommissioning liabilities, and may acquire interests in properties on an “as is” basis without recourse to the seller of such interest or

the seller may have limited resources to provide post-sale indemnities.

In addition, successful acquisitions of gas and oil assets require an assessment of a number of factors, including estimates of

recoverable reserves, the time of recovering reserves, exploration potential, future natural gas, NGLs and oil prices and operating

costs. Such assessments are inexact, and we cannot guarantee that we make these assessments with a high degree of accuracy. In

connection with assessments, we perform a review of the acquired assets. However, such a review will not reveal all existing or

potential problems. Furthermore, review may not permit us to become sufficiently familiar with the assets to fully assess their

deficiencies and capabilities.

We may be unable to make attractive acquisitions or successfully integrate acquired businesses, and any inability to do so may

disrupt our business and hinder our ability to grow.

In the future we may make acquisitions of businesses that complement or expand our current business. However, we may not be able

to identify attractive acquisition opportunities. Even if we do identify attractive acquisition opportunities, we may not be able to

complete the acquisition or do so on commercially acceptable terms.

The success of any completed acquisition will depend on our ability to integrate effectively the acquired business into our existing

operations. The process of integrating acquired businesses may involve unforeseen difficulties and may require a disproportionate

amount of our managerial and financial resources. In addition, possible future acquisitions may be larger and for purchase prices

significantly higher than those paid for earlier acquisitions. No assurance can be given that we will be able to identify additional

suitable acquisition opportunities, negotiate acceptable terms, obtain financing for acquisitions on acceptable terms or successfully

acquire identified targets. Our failure to achieve consolidation savings, to integrate the acquired businesses and assets into our existing

operations successfully or to minimize any unforeseen operational difficulties could have a material adverse effect on our financial

condition and results of operations.

Our Credit Facility and other debt agreements also limit our ability to incur certain indebtedness, which could indirectly limit our

ability to engage in acquisitions of businesses.

The Company’s success will be impacted by its ability to fully integrate Canvas and deliver the value of the combined

underlying businesses; the full financial benefits expected from the Company may not be fully achieved.

While the Company believes that the financial benefits of the Canvas acquisition and the costs associated with the Canvas acquisition

have been reasonably estimated, unanticipated events or liabilities may arise or become apparent which may, in turn, result in a delay

or reduction in the benefits anticipated to be derived from the Canvas acquisition, or in costs significantly in excess of those estimated.

No assurance can be given that the integration process will deliver all or substantially all of the expected benefits or realize any such

benefits within the assumed timeframe, or that the costs to integrate and achieve the financial benefits will not be higher than

anticipated.

Further, the demands that the integration process may have on management time could result in diversion of the attention of the

Company's management and employees from ongoing operations, pursuing other potential business opportunities and may cause a

delay in other projects currently contemplated by the Company. To the extent that the combined company is unable to efficiently

integrate the operations of the Company and Canvas, realize anticipated financial benefits, retain key personnel and avoid unforeseen

costs or delay, there may be a material adverse effect on the business, results of operations, financial condition, cash flows or

prospects of the Company.

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We may not have good title to all our assets and licenses.

Although we believe that we take due care and conduct due diligence on new acquisitions in a manner that is consistent with industry

practice, there can be no assurance that we have good title to all our assets and the rights to develop and produce natural gas and oil

from our assets. Such reviews are inherently incomplete and it is generally not feasible to review in depth every individual well or

field involved in each acquisition. There can be no assurance that any due diligence carried out by us or by third parties on our behalf

in connection with any assets that we acquire will reveal all of the risks associated with those assets, and the assets may be subject to

preferential purchase rights, consents and title defects that were not apparent at the time of acquisition. We may acquire interests in

properties on an “as is” basis without recourse to the seller of such interest or the seller may have limited resources to provide post-

sale indemnities. In addition, changes in law or change in the interpretation of law or political events may arise to defeat or impair our

claim to certain properties which we currently own or may acquire which could result in a material adverse effect on our business,

results of operations, financial condition, cash flows or prospects.

Restrictions in our existing and future debt agreements could limit our growth and our ability to engage in certain activities.

Our Credit Facility and other debt agreements contain a number of significant covenants that may limit our ability to, among other

things:

•Incur additional indebtedness;

•Incur liens;

•Sell assets;

•Make certain debt payments;

•Enter into agreements that restrict or prohibit the payment of dividends;

•Limits our subsidiaries’ ability to make certain payments with respect to their equity, based on the pro forma effect thereof on

certain financial ratios, which would be the source of distributable profits and available cash from which we may issue a dividend;

and

•Conduct hedging activities.

In addition, our Credit Facility and other debt agreements require us to maintain compliance with certain financial covenants.

We may also be prevented from taking advantage of business opportunities that arise because of the limitations from the restrictive

covenants under our Credit Facility and other debt agreements. These restrictions may limit our ability to obtain future financings to

withstand a future downturn in our business or the economy in general, or to otherwise conduct necessary corporate activities.

A material uncured breach of any covenant in our Credit Facility and other debt agreements will result in a default under the

agreement and may result in an event of default if such default is not cured during any applicable grace period. An event of default, if

not waived, could result in acceleration of the indebtedness outstanding and in an event of default with respect to, and an acceleration

of, the indebtedness outstanding under any other debt agreements to which we are a party. Any such accelerated indebtedness would

become immediately due and payable. If that occurs, we may not be able to make all of the required payments or borrow sufficient

funds to refinance such indebtedness. Even if new financing were available at that time, it may not be on terms that are acceptable to

us.

Any significant reduction in our borrowing base under our Credit Facility as a result of periodic borrowing base

redeterminations or otherwise may negatively impact our ability to fund our operations.

Our Credit Facility limits the amounts we can borrow up to a borrowing base amount, which the lenders, in their sole discretion,

unilaterally determine based upon our reserve reports for the applicable period and other data and reports. Such determinations will be

made on a regular basis semi-annually (each a “Scheduled Redetermination”) and at the option of the lenders with more than 66.6% of

the loans and commitments under the Credit Facility, no more than one time in between each Scheduled Redetermination. As of

February 25, 2026, our borrowing base was $825 million.

In the future, we may not be able to access adequate funding under our Credit Facility as a result of a decrease in our borrowing base

due to the issuance of new indebtedness, the outcome of a borrowing base redetermination, or an unwillingness or inability on the part

of lending counterparties to meet their funding obligations and the inability of other lenders to provide additional funding to cover a

defaulting lender’s portion. Declines in commodity prices from their current levels could result in a determination to lower the

borrowing base and, in such a case, we could be required to repay any indebtedness in excess of the redetermined borrowing base. As

a result, we may be unable to make acquisitions or otherwise carry out business plans, which could have a material adverse effect on

our business, results of operations, financial condition, cash flows or prospects.

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The securitizations of our limited purpose, bankruptcy-remote, wholly owned subsidiaries may expose us to financing and

other risks, and there can be no assurance that we will be able to access the securitization market in the future, which may

require us to seek more costly financing.

Through limited purpose, bankruptcy-remote, wholly owned subsidiaries (“SPVs”), we have securitized and expect to securitize in the

future, certain of our assets to generate financing. In such transactions, we convey a pool of assets to an SPV, that, in turn, issues

certain securities or enters into certain debt agreements. The securities issued by the SPVs are each collateralized by a pool of assets.

In exchange for the transfer of finance receivables to the SPV, we typically receive the cash proceeds from the sale of the securities or

entering into term loans.

Although our SPVs have completed securitizations in connection with the ABS IV Notes, ABS VI Notes, ABS VII Notes, ABS VIII

Notes (which now covers ABS III Notes and ABS V Notes), ABS IX Notes, ABS X Notes (which now covers Term Loan I, ABS I

Notes, and ABS II Notes) (each as defined herein), and ABS XI Notes, there can be no assurance that we, through our SPVs, will be

able to complete additional securitizations, particularly if the securitization markets become constrained. In addition, the value of any

securities that our limited purpose, bankruptcy-remote, wholly owned subsidiaries retain in our securitizations, including securities

retained to comply with applicable risk retention rules, might be reduced or, in some cases, eliminated as a result of an adverse change

in economic conditions or the financial markets. In addition, our ABS IV Notes, ABS VI Notes, ABS VII Notes, ABS VIII Notes

(which now covers ABS III Notes and ABS V Notes), ABS IX Notes, ABS X Notes (which now covers Term Loan I, ABS I Notes,

and ABS II Notes), and ABS XI Notes are subject to customary accelerated amortization events, including events tied to the failure to

maintain stated debt service coverage ratios.

If it is not possible or economical for us to securitize our assets in the future, we would need to seek alternative financing to support

our operations and to meet our existing debt obligations, which may be less efficient and more expensive than raising capital via

securitizations and may have a material adverse effect on our results of operations, financial condition, cash flows and liquidity.

An increase in interest rates would increase the cost of servicing our indebtedness and could reduce our profitability, decrease

our liquidity and impact our solvency.

Our Credit Facility provides for, and our future debt agreements may provide for, debt incurred thereunder to bear interest at variable

rates. As of February 25, 2026, we had $243 million outstanding on our Credit Facility. Increases in interest rates would increase the

cost of servicing indebtedness under our Credit Facility or under future debt agreements subject to interest at variable rates, and

materially reduce our profitability, decrease our liquidity and impact our solvency.

Our hedging activities could result in financial losses or could reduce our net income.

To achieve more predictable cash flows, we employ a hedging strategy involving opportunistically hedging a majority of our first two

years of production as well as hedging a significant percentage of production beyond our first two years of forecasted production.

Even so, the remainder of our production that is unhedged is exposed to the continuing and prolonged declines in the prices of natural

gas, NGLs and oil. Our results of operations and financial condition would be negatively impacted if the prices of natural gas, NGLs

or oil were to remain depressed or decline materially from current levels. To achieve more predictable cash flows and to reduce our

exposure to fluctuations in the prices of natural gas, NGLS and oil, we may enter into additional hedging arrangements for a

significant portion of our production.

Our derivative contracts may result in substantial gains or losses. For example, we reported income from operations of $535 million

for the year ended December 31, 2025, compared to a loss of $97 million for the year ended December 31, 2024 and income of

$1.1 billion for the year ended December 31, 2023. While our earnings are impacted by a variety of factors as described in Results of

Operations, a key driver of our year-over-year change from a loss to income was attributable to a change of $255 million in the mark-

to-market valuation adjustment on our derivative financial instrument valuations to a gain of $218 million in 2025 from a loss of $38

million in 2024. There can be no assurance that we will not realize additional losses due to our hedging activities in the future. In

addition, if we enter into any derivative contracts and experience a sustained material interruption in our production, we might be

forced to satisfy all or a portion of our hedging obligations without the benefit of the cash flows from our sale of the underlying

physical commodity, resulting in a substantial diminution of our liquidity. Our ability to use hedging transactions to protect us from

future natural gas, NGL and oil price volatility will be dependent upon natural gas, NGL and oil prices at the time we enter into future

hedging transactions and our future levels of hedging and, as a result, our future net cash flows may be more sensitive to commodity

price changes. In addition, if commodity prices remain low, we will not be able to replace our hedges or enter into new hedges at

favorable prices.

Our price hedging strategy and future hedging transactions will be determined at our discretion, subject to the terms of certain

agreements governing our indebtedness. The prices at which we hedge our production in the future will be dependent upon commodity

prices at the time we enter into these transactions, which may be substantially higher or lower than current prices. Accordingly, our

price hedging strategy may not protect us from significant declines in prices received for our future production. Conversely, our

hedging strategy may limit our ability to realize cash flows from commodity price increases. It is also possible that a substantially

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larger percentage of our future production will not be hedged as compared with the next few years, which would result in our natural

gas, NGL and oil revenues becoming more sensitive to commodity price fluctuations.

The failure of our hedge counterparties to meet their obligations to us may adversely affect our financial results.

An attendant risk exists in hedging activities that the counterparty in any derivative transaction cannot or will not perform under the

instrument and that we will not realize the benefit of the hedge. Disruptions in the financial markets could lead to sudden decreases in

a counterparty’s liquidity, which could make them unable to perform under the terms of the derivative contract and we may not be

able to realize the benefit of the derivative contract. Any default by the counterparty to these derivative contracts when they become

due would have a material adverse effect on our results of operations, financial condition, cash flows and prospects.

We may not be able to enter into commodity derivatives on favorable terms or at all.

To achieve a more predictable cash flow, we employ a hedging strategy involving opportunistically hedging a majority of our first two

years of production as well as hedging a significant percentage of production beyond our first two years of forecasted production. If

we are unable to maintain sufficient hedging capacity with our counterparties, we could have greater exposure to changes in

commodity prices and interest rates, which could have a material adverse impact on our business, results of operations, financial

condition, cash flows or prospects.

Risks Relating to Legal, Tax, Environmental and Regulatory Matters

We are subject to regulation and liability under environmental, health and safety regulations, the violation of which may affect

our financial condition and operations.

We operate in an industry that has certain inherent hazards and risks, and consequently we are subject to stringent and comprehensive

laws and regulations, especially with regard to the protection of health, safety and the environment. For example, we are subject to

laws and regulations related to occupational safety and health, hydraulic fracturing activities, air emissions, soil and water quality, the

protection of threatened and endangered plant and animal species, biodiversity and ecosystems, and the safety of our assets and

employees. Although we believe that we have adequate procedures in place to mitigate operational risks, there can be no assurances

that these procedures will be adequate to address every potential health, safety and environmental hazard, and a failure to adequately

mitigate risks may result in loss of life, injury, or adverse impacts on the health of employees, contractors and third-parties or the

environment. Any failure by us or one of our subcontractors, whether inadvertent or otherwise, to comply with applicable legal or

regulatory requirements may give rise to civil, administrative and/or criminal liabilities, civil fines and penalties, delays or restrictions

in acquiring or disposing of assets and/or delays in securing or maintaining required permits, licenses and approvals. Further, a lack of

regulatory compliance may lead to denial, suspension, or termination of permits, licenses, or approvals that are required to operate our

sites or could result in other operational restrictions or obligations. Our health, safety and environmental policies require us to observe

local, state and national legal and regulatory requirements and to apply generally accepted industry best practices where legislation or

regulation does not exist.

The terms and conditions of licenses, permits, regulatory orders, approvals or permissions may include more stringent operational,

environmental and/or health and safety requirements. Obtaining development or production licenses and permits may become more

difficult or may be delayed due to federal, regional, state or local governmental constraints, considerations, or requirements on issuing.

Furthermore, third-parties such as environmental NGOs may administratively or judicially contest or protest licenses and permits

already granted by relevant authorities or applications for the same and operations may be subject to other administrative or judicial

challenges.

In addition, under certain environmental laws and regulations, we could be subject to joint and several strict liability for the removal or

remediation of previously released materials, pollution, or property contamination regardless of whether we were responsible for the

release or contamination or whether the operations were in compliance with all applicable laws at the time those actions were taken.

Private parties, including the owners of properties on or adjacent to well sites and facilities where petroleum hydrocarbons or wastes

are taken for reclamation or disposal, may also have the right to pursue legal actions as well as to seek damages for non-compliance

with environmental laws and regulations or for personal injury or property damage. In addition, the risk of accidental spills or releases

of pollutants or contaminants could expose us to significant liabilities that could have a material adverse effect on our business,

financial condition and results of operations.

We incur, and expect to continue to incur, capital and operating costs in an effort to comply with increasingly complex operational

health and safety and environmental laws and regulations. New laws and regulations, the imposition of more stringent requirements in

permits and licenses, increasingly strict enforcement of, or new interpretations of, existing laws, regulations and permits and licenses,

or the discovery of previously unknown contamination or hazards may require further costly expenditures to, for example:

•Modify operations, including an increase in plugging and abandonment operations;

•Install or upgrade pollution or emissions control equipment;

•Perform site clean ups, including the remediation and reclamation of gas and oil sites;

•Curtail or cease certain operations;

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•Provide financial securities, bonds, and/or take out insurance; or

•Pay fees or fines or make other payments for pollution, discharges to the environment or other breaches of environmental or

health and safety requirements or consent agreements with regulatory agencies.

We cannot predict with any certainty the full impact of any new laws, regulations, or policies on our operations or on the cost or

availability of insurance to cover the risks associated with such operations. The costs of such measures and liabilities related to

potential operational health and safety or environmental risks associated with the Company may increase, which could materially and

adversely affect our business, results of operations, financial condition, cash flows or prospects. In addition, it is not possible to predict

what future operational health and safety or environmental laws and regulations will be enacted or how current or future operational,

health, safety or environmental laws and regulations will be applied or enforced. We may have to incur significant expenditure for the

installation and operation of additional systems and equipment for monitoring and carry out remedial measures in the event that

operational health and, safety and environmental regulations become more stringent or costly reform is implemented by regulators.

Any such expenditure may have a material adverse effect on our business, results of operations, financial condition, cash flows or

prospects. No assurance can be given that compliance with occupational health and safety and environmental laws or regulations in the

regions where we operate will not result in a curtailment of production or a material increase in the cost of production or development

activities.

Heightened attention to sustainability matters may impact our business and financial results.

In recent years, heightened attention has been given to corporate activities related to sustainability matters in public discourse and the

investment community. A number of advocacy groups, both domestically and internationally, have previously campaigned for

governmental and private action to promote change at public companies related to sustainability matters, including through the

investment and voting practices of investment advisers, public pension funds, activist investors, universities and other members of the

investing community. These activities include attention and demands for action related to weather events and promoting the use of

alternative forms of energy. These activities may result in demand shifts for oil and natural gas products and additional governmental

investigations and private litigation against us. In addition, stakeholder views continue to evolve and vary, and our initiatives related to

these matters, which rely on standards for measuring progress that are subject to change, are unlikely to satisfy all stakeholders. Our

failure to comply with evolving investor or customer expectations and standards (which may support or disfavor sustainability

initiatives) or if we are perceived to not have responded appropriately to the growing concern for sustainability issues, regardless of

whether there is a legal requirement to do so, could cause reputational harm to our business, increase our risk of litigation, including as

a result of heightened scrutiny of and challenges to sustainability initiatives and related claims, and could have a material adverse

effect on our results of operation.

In addition, organizations that provide information to investors on corporate governance and related matters have developed ratings

systems for evaluating companies on their approach to sustainability matters. These ratings are used by some investors to inform their

investment and voting decisions. Unfavorable sustainability ratings may lead to increased negative investor sentiment toward us and

our industry and to the diversion of investment to other companies or industries, which could have a negative impact on our stock

price and our access to and costs of capital. Also, institutional lenders may decide not to provide funding for oil and natural gas

companies based on weather event-related concerns, which could affect our access to capital for potential growth projects.

The U.S. administration, acting through the executive branch and/or in coordination with Congress, could enact or rescind

rules and regulations that may impact our operations.

Governmental, scientific and public concern over the threat of weather events has resulted in increasing political risks in the United

States, including weather event-related commitments and uncertainty expressed by some officials and political candidates who are

now, or may in the future be, in political office.

While our operations are largely not conducted on federal lands, we may in the future consider acquisitions of natural gas and oil

assets located in areas in which the development of such assets would require permits and authorizations to be obtained from or issued

by federal agencies. To conduct these operations, we may be required to file applications for permits, seek agency authorizations and

comply with various other statutory and regulatory requirements. Further, new oil and gas leasing on public lands has been the subject

of recent proposed executive action rescinding weather event-related initiatives and requirements. Complying with these evolving

requirements may adversely affect our ability to conduct operations at the costs and in the time periods anticipated, and may

consequently adversely impact our anticipated returns from our operations.

Any such measures or increased costs could have a material adverse effect on our business, results of operations, financial condition,

cash flows or prospects.

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Our operations are dependent on our compliance with obligations under permits, licenses, contracts and field development

plans.

Our operations must be carried out in accordance with the terms of permits, licenses, operating agreements, annual work programs and

budgets. Fines, penalties, or enforcement actions may be imposed and a permit or license may be suspended or terminated if a permit

or license holder, or party to a related agreement, fails to comply with its obligations under such permit, license or agreement, or fails

to make timely payments of levies and taxes for the licensed activity, or fails to provide the required geological information or meet

other reporting requirements. It may from time to time be difficult to ascertain whether we have complied with obligations under

permits or licenses as the extent of such obligations may be unclear or ambiguous and regulatory authorities in jurisdictions in which

we do business, or in which we may do business in the future, may not be forthcoming with confirmatory statements that work

obligations have been fulfilled, which can lead to further operational uncertainty.

In addition, we and our commercial partners, as applicable, have obligations to operate assets in accordance with specific requirements

under certain licenses and related agreements, field development agreements, laws and regulations. If we or our partners were to fail to

satisfy such obligations with respect to a specific field, the license or related agreements for that field may be suspended, revoked or

terminated. Although we have in the past acquired and may in the future acquire shale assets, a significant source of our natural gas

and crude oil remains conventional wells. In some instances, these conventional wells are located on the same property as

unconventional wells that produce shale oil and gas. In these cases, the rights to access the shale layers of the property will typically

be conditioned on the ongoing productivity of conventional wells on the property. Furthermore, the shale rights may be owned by a

third party, and in such instances, we will enter into a joint use agreement with the third party. This joint use agreement may stipulate

that in consideration for permission to operate the conventional wells, we are to use reasonable efforts to maintain production so that the

third party retains the shale licenses. If we fail to maintain production in the conventional wells, under the joint use agreement, we may

be liable to the third party for replacing the lost land rights. The relevant authorities are typically authorized to, and do from time to time,

inspect to verify compliance by us or our commercial partners, as applicable, with relevant laws and the licenses or the agreements

pursuant to which we conduct our business. There can be no assurance that the views of the relevant government agencies regarding the

development of the fields that we operate or the compliance with the terms of the licenses pursuant to which we conduct such operations

will coincide with our views, which might lead to disagreements that may not be resolved.

The suspension, revocation, withdrawal or termination of any of the permits, licenses or related agreements pursuant to which we may

conduct business, as well as any delays in the continuous development of or production at our fields caused by the issues detailed

above could materially and adversely affect our business, results of operations, financial condition, cash flows or prospects. In

addition, failure to comply with the obligations under the permits, licenses or agreements pursuant to which we conduct business,

whether inadvertent or otherwise, may lead to fines, penalties, restrictions, enforcement actions brought by governmental authorities,

withdrawal of licenses and termination of related agreements.

We do not insure against certain risks and our insurance coverage may not be adequate for covering losses arising from

potential operational hazards and unforeseen interruptions.

We insure our operations in accordance with industry practice and plan to continue to insure the risks we consider appropriate for our

needs and circumstances. However, we may elect not to have insurance for certain risks, due to the high premium costs associated

with insuring those risks or for various other reasons, including an assessment in some cases that the risks are remote.

Our insurance may not be adequate to cover all losses or liabilities we may suffer. We cannot assure that we will be able to obtain

insurance coverage at reasonable rates (or at all), or that any coverage we or the relevant operator obtain, and any proceeds of

insurance, will be adequate and available to cover any claims arising. We may become subject to liability for pollution, blow-outs or

other hazards against which we have not insured or cannot insure, including those in respect of past activities for which we were not

responsible. Any indemnities we may receive from sub-contractors, operators or joint venture partners may be difficult to enforce if

such sub-contractors, operators or joint venture partners lack adequate resources.

Operational insurance policies are usually placed in one year contracts and the insurance market can withdraw cover for certain risks

due to events occurring in other parts of the industry, thus greatly increasing the costs of risk transfer. For example, in September

2018, a gas pipeline operated by another midstream company exploded in Beaver County, Pennsylvania, a state in which we have

operations. The explosion resulted in the destruction of residential property and motor vehicles as well as the evacuation of nearby

households. Catastrophic events such as these may cause the insurance costs for our midstream operations to rise, despite us not being

involved in the catastrophic event. In the event that insurance coverage is not available or our insurance is insufficient to fully cover

any losses, including losses incurred due to lost revenues resulting from third party operations or processing plants, claims and/or

liabilities incurred, or indemnities are difficult to enforce, our business and operations, financial results or financial position may be

disrupted and adversely affected.

The payment by our insurers of any insurance claims may result in increases in the premiums payable by us for our insurance coverage

and could adversely affect our financial performance. In the future, some or all of our insurance coverage may become unavailable or

prohibitively expensive.

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Our internal systems and website may be subject to intentional and unintentional disruption, and our confidential information

may be misappropriated, stolen or misused, which could adversely impact our reputation and future sales.

We have faced, and may in the future continue to face, cyber-attacks and data security breaches. Such cyber-attacks and breaches may

come from criminal hackers, state-sponsored threat actors, industrial espionage or employee malfeasance and are designed to penetrate

our network security or the security of our internal systems, misappropriate proprietary information and/or cause interruptions to our

services. We expect to continue to face similar threats in the future, and cannot guarantee that we will be able to successfully prevent all

future attacks. Such future attacks could include malware, denial-of-service attacks, data breaches, hacking, social engineering or

"phishing", deepfake attacks, computer viruses, employee or insider threats, malfeasance, supply chain attacks, physical breaches,

vendor email compromise, payment fraud and ransomware attacks. If an actual or perceived breach of our network security occurs, it

could adversely affect our business or reputation, and may trigger governmental notice requirements and public disclosure, and expose

us to the loss of information, fines, regulatory actions, sanctions, litigation and possible liability. An actual security breach could also

impair our ability to operate our business and provide products and services to our customers. Additionally, malicious attacks,

including cyber-attacks, may damage our assets, prevent production at our producing assets, cause disruptions in business operations,

lead to injury to people or harm to the environment and otherwise significantly affect corporate activities. For example, we utilize

electronic monitoring of meters and flow rate devices to monitor pressure build-up in our production wells. If there were a cyber-attack

that penetrated our monitoring systems such that they provided false readings, this could result in an unknown pressure build-up,

creating a dangerous situation which could lead to an explosion. As techniques used to obtain unauthorized access to or to sabotage

systems change frequently and may not be known until launched against us or our third-party service providers, we may be unable to

anticipate or implement adequate measures to protect against these attacks and our service providers may likewise be unable to do so.

Additionally, artificial intelligence has contributed to an increase in the number and sophistication of cyber-attacks. As there continue

to be advances in artificial intelligence, threat actors will develop increasingly sophisticated cyber-attack strategies. This may include

the use of artificial intelligence to enhance and automate phishing schemes, advance malware, or carry out cyber-attacks that are more

effective and more difficult to detect or stop. Such an outcome would have a material adverse impact on our business, results of

operations, financial condition, cash flows or prospects.

In addition, confidential or financial payment information that we maintain may be subject to misappropriation, theft and deliberate or

unintentional misuse by current or former employees, third-party contractors or other parties who have had access to such information.

Any such misappropriation and/or misuse of our information could result in the Company, among other things, being in breach of

certain data protection requirements and related legislation as well as incurring liability to third parties. We expect that we will need to

continue closely monitoring the accessibility and use of confidential information in our business, educate our employees and third-

party contractors about the risks and consequences of any misuse of confidential information and, to the extent necessary, pursue legal

or other remedies to enforce our policies and deter future misuse. If our confidential information is misappropriated, stolen or misused

as a result of a disruption to our website or internal systems this could have a material adverse effect on our business, results of

operations, financial condition, cash flows or prospects.

Although we maintain insurance to protect against losses resulting from certain of data protection breaches and cyber-attacks, our

coverage for protecting against such risks may not be sufficient.

Our operations are subject to the risk of litigation.

From time to time, we may be subject, directly or indirectly, to litigation arising out of our operations and the regulatory environments

in our areas of operations. Historically, categories of litigation that we have faced included actions by royalty owners over payment

disputes, personal injury claims and property related claims, including claims over property damage, trespass or nuisance. Although

we currently face no material litigation that is reasonably expected to have an adverse material impact for which we are not

sufficiently indemnified or insured, damages claimed under such litigation in the future may be material or may be indeterminate, and

the outcome of such litigation, if determined adversely to us, could individually or in the aggregate, be reasonably expected to have a

material and adverse effect on our business, financial position or results of operations. While we assess the merits of each lawsuit and

defend ourselves accordingly, we may be required to incur significant expenses or devote significant resources to defend against such

litigation. In addition, the adverse publicity surrounding such claims may have a material adverse effect on our business.

We are subject to certain tax risks.

Tax legislation may be enacted in the future that could negatively impact our current or future tax structure and effective tax rates.

Following the completion of the U.S. Domestication, our public holding company is a U.S. corporation. Accordingly, any changes in

U.S. federal income tax law could negatively impact our effective tax rate and cash flows, which could cause our business, results of

operations, financial condition, cash flows or prospects to be materially adversely affected.

We are subject to income taxes in the United States, and there can be no certainty that the current taxation regime in the United States

or other jurisdictions within which we currently operate or may operate in the future will remain in force or that the current levels of

corporation taxation will remain unchanged. For example, the U.S. government has imposed a minimum tax on corporations and

proposed and may enact significant changes to the taxation of business entities, including, among others, an increase in the U.S.

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federal income tax rate applicable to corporations, like us, and surtaxes on certain types of income. Certain U.S. localities also

maintain a severance tax or impact fee on the removal of oil and natural gas from the ground, and such tax rates may be increased or

new severance taxes or impact fees may be implemented.

Our domestic tax liabilities are subject to the allocation of expenses in differing jurisdictions. Our effective tax rate could be adversely

affected by changes in the mix of earnings and losses in taxing jurisdictions with differing statutory tax rates, certain non-deductible

expenses, the valuation of deferred tax assets and liabilities and changes in federal or state tax laws and accounting principles.

Increases in our effective tax rate could materially affect our net financial results. Although we believe that our income tax liabilities

are reasonably estimated and accounted for in accordance with applicable laws and principles, an adverse resolution of one or more

uncertain tax positions in any period could have a material adverse effect on our business, results of operations, financial condition,

cash flows or prospects.

In the past, we have been able to offset a large portion of our U.S. federal income tax burden with marginal well tax credits that are

available to qualified producers who operate lower-volume wells during a low commodity pricing environment. There can be no

assurance that there will be no amendment to the existing taxation laws applicable to us, which may have a material adverse effect on

our financial position. Our ability to utilize marginal well tax credits in the United States could be or become subject to limitations (for

example, if we are deemed to undergo an “ownership change” for applicable U.S. federal income tax purposes).

The nature and amount of tax that we expect to pay and the tax attributes expected to be available to us are each dependent upon

several assumptions, any one of which may change and which would, if so changed, affect the nature and amount of tax payable and

tax attributes available.

Risks Relating to Our Common Stock

The expected benefits of the U.S. Domestication may not be realized.

On November 21, 2025, we completed the U.S. Domestication following our Board’s conclusion that the U.S. market is the natural

long term primary listing venue for the Company and that moving to a US primary listing (while retaining a secondary UK listing) is

in the best interests of the business and its stakeholders. We believe that the U.S. Domestication and moving to a U.S. primary listing

will increase access to a broader set of investors, support inclusion in additional stock indices, streamline our corporate structure, and

provide more flexibility in accessing capital and, as a result, will be beneficial to our business and operations, the holders of our

common stock, and other stakeholders. The success of the U.S. Domestication and moving to a U.S. primary listing will depend, in

part, on our ability to realize the anticipated benefits associated with the U.S. Domestication and associated reorganization of our

corporate structure. There can be no assurance that all of the anticipated benefits of the U.S. Domestication and moving to a U.S.

primary listing will be achieved, particularly as the achievement of the benefits are subject to factors that we do not and cannot

control.

We expect to incur additional costs related to the U.S. Domestication, including non-recurring costs as well as recurring costs a

result of financial reporting obligations of being a “domestic issuer” as opposed to a “foreign private issuer” in the United

States.

We will incur additional legal, accounting and other expenses that may exceed the expenses we incurred prior to the U.S.

Domestication. The obligations of being a public company in the U.S. require significant expenditures and will place significant

demands on our management and other personnel, including costs resulting from public company reporting obligations under the

Exchange Act, and the rules and regulations regarding corporate governance practices, including those under the Sarbanes-Oxley Act

of 2002 (the “Sarbanes-Oxley Act”), the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, and the listing

requirements of the New York Stock Exchange (“NYSE”). Additionally, as we are retaining a secondary UK listing, we will also need

to continue to comply with certain UK Listing Rules and certain other applicable requirements.

These rules require that we maintain effective disclosure and financial controls and procedures, internal control over financial

reporting and changes in corporate governance practices, among many other complex rules that are often difficult to monitor and

maintain compliance with. While we were subject to many of these requirements prior to the U.S. Domestication, additional legal and

accounting requirements will apply to us following the U.S. Domestication. Our management and other personnel will need to devote

additional time to ensure compliance with all of these requirements and to keep pace with new regulations, otherwise we may fall out

of compliance and risk becoming subject to litigation or being delisted, among other potential problems.

The requirements of being a public company, including additional rules and regulations that we must comply with now that

we are no longer a foreign private issuer, may strain our resources, divert management’s attention, and affect our ability to

attract and retain executive officers and qualified board members.

We are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and

Consumer Protection Act of 2010, the listing requirements of the NYSE and other applicable securities rules and regulations, as well

as certain UK Listing Rules. Compliance with these rules and regulations has increased our legal and financial compliance costs,

making some activities more difficult, time-consuming, and costly, and has increased demand on our systems and resources. The

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Exchange Act requires, among other things, that we file annual reports with respect to our business and results of operations. The

Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control

over financial reporting. In order to maintain and, if required, improve our disclosure controls and procedures and internal control over

financial reporting to meet this standard, significant resources and management oversight is required.

Additionally, as of November 21, 2025, we are no longer a foreign private issuer, and we are required to comply with all of the

provisions applicable to a U.S. domestic issuer under the Exchange Act, including filing an annual report on Form 10-K, quarterly

periodic reports and current reports for certain events, complying with the sections of the Exchange Act regulating the solicitation of

proxies, requiring insiders to file public reports of their share ownership and trading activities and insiders being liable for profit from

trades made in a short period of time. We are also no longer exempt from the requirements of Regulation FD promulgated under the

Exchange Act related to selective disclosures. We are also no longer permitted to follow the UK’s rules in lieu of the corporate

governance obligations imposed by the NYSE, and are required to comply with the governance practices required by U.S. domestic

issuers listed on the NYSE. We are also required to comply with all other rules of the NYSE applicable to U.S. domestic issuers. In

addition, we are required to report our financial results under GAAP, including our historical financial results, which have previously

been prepared in accordance with IFRS.

The regulatory and compliance costs associated with the reporting and governance requirements applicable to U.S. domestic issuers

may be significantly higher than the costs we previously incurred as a foreign private issuer. We expect to continue to incur significant

legal, accounting, insurance and other expenses and to expend greater time and resources to comply with these requirements.

Additionally, as a result of the complexity involved in complying with the rules and regulations applicable to public companies, our

management’s attention may be diverted from other business concerns, which could harm our business, results of operations and

financial condition. In addition, the pressures of operating a public company may divert management’s attention to delivering short-

term results, instead of focusing on long-term strategy. In addition, we may need to develop our reporting and compliance

infrastructure and may face challenges in complying with the new requirements applicable to us. If we fall out of compliance, we risk

becoming subject to litigation or being delisted, among other potential problems.