Permian Resources (PR) Risk Analysis

The existence of a material title deficiency can render a lease worthless and can adversely affect our results of operations and financial condition. While we typically obtain title opinions prior to commencing drilling operations on a lease or in a unit, the failure of title may not be discovered until after a well is drilled, in which case we may lose the lease and the right to produce all or a portion of the minerals under the property.

From time to time, federal and state level legislation has been proposed that, if enacted into law, would make significant changes to tax laws, including to certain key U.S. federal and state income tax laws affecting the oil and natural gas industry. Such proposed legislation has included, but has not been limited to, (i) eliminating the immediate deduction for intangible drilling and development costs, (ii) repealing the percentage depletion allowance for oil and natural gas properties, (iii) extending the amortization period for certain geological and geophysical expenditures, (iv) eliminating certain other tax deduction and relief previously available to oil and natural gas companies and (v) increasing the U.S. federal income tax rate applicable to corporations like us. No accurate prediction can be made as to whether any such legislative changes will be proposed or enacted in the future or, if enacted, what the specific provisions or the effective date of any such legislation would be. The passage of any legislation as a result of these proposals and other similar changes in U.S. federal and state income tax laws could adversely affect our business, results of operations, financial condition and cash flow.

The threat of climate change continues to attract considerable attention in the United States and around the world. Numerous proposals have been made and could continue to be made at the international, national, regional and state levels of government to monitor, limit, and report existing emissions of GHGs as well as to reduce such future emissions. While no comprehensive climate change legislation has been implemented at the federal level, certain federal laws, like the IRA, have been enacted to advance numerous climate-related objectives. The IRA contains hundreds of billions of dollars in incentives for the development of renewable energy, clean hydrogen, clean fuels, electric vehicles, and supporting infrastructure and carbon capture and sequestration, among other provisions. Moreover, various federal agencies have adopted climate change considerations into their rulemaking and decision-making processes and have promulgated regulations that seek to restrict, monitor, or otherwise limit GHG emissions. International climate commitments made by political, industrial, and financial stakeholders may also impact commercial, regulatory, and consumer trends related to climate change. In response to findings that emissions of carbon dioxide, methane and other GHGs present an endangerment to public health and the environment, the EPA has adopted regulations pursuant to the CAA that, among other things, require PSD preconstruction and Title V operating permits for GHG emissions from certain large stationary sources, mandate monitoring and annual reporting of GHG emissions, and impose new standards for reducing methane emissions from oil and gas operations by limiting venting and flaring and implementing leak detection and repair programs. The IRA also imposes the first-ever fee on GHG emissions through a waste methane emissions charge, which the EPA has finalized regulations to implement. In May 2024, the EPA has also published a final rule expanding GHG emissions reporting obligations for certain oil and gas sector sources. While the first Trump administration took a number of actions to revise federal regulation of methane from the oil and gas sector, these actions were subsequently reversed by both the Biden administration and Congress. Moreover, in December 2023, the EPA published a final rule that established more stringent performance standards for new sources and first-time standards for existing sources under applicable agency regulations at 40 C.F.R. Part 60 for methane and VOC emissions for the crude oil and natural gas sources. The requirements imposed by this rule include enhanced leak detection and repair obligations, zero-emission requirements for certain processes and practices, "green well" completion standards, limitations on routine flaring, and a "Super Emitter Response Program" which triggers additional requirements following certain large emissions events. The BLM has also finalized a rule limiting the flaring and venting of methane emissions at oil and gas sources on federal lands. Compliance with these rules and legislation will likely require enhanced record-keeping practices, the purchase of new equipment, such as optical gas imaging instruments to detect leaks, increased frequency of maintenance and repair activities to address emissions leakage and additional personnel time to support these activities or the engagement of third-party contractors to assist with and verify compliance. Separately, the SEC published a final rule that would mandate disclosure of climate-related data, risks, and opportunities, including financial impacts, physical and transition risks, related governance and strategy, and GHG emissions by certain registrants, though the implementation of this rule is currently paused pending the outcome of legal challenges against the rule. The SEC has also, from time to time, focused additional scrutiny on existing climate-related disclosures in public filings, and there is potential for enforcement if the SEC were to allege that an issuer's existing disclosures were misleading or deficient. While legal challenges to many of the above discussed regulations are ongoing and, either the current Trump administration or Congress may also pursue rulemakings or legislation, respectively, that could repeal, revise, or otherwise limit the enforcement of these regulations and certain of the IRA's provisions, like the methane emissions charge, we cannot predict whether and when such action will be taken and the outcome and timeline for such actions may continue to be uncertain and subject to further legal challenges. At the international level, the United Nations-sponsored Paris Agreement encourages nations to limit their GHG emissions through nationally-determined, though non-binding, reduction goals. The United States' most recent goal was to reduce its economy-wide net GHG emissions by 61 to 66 percent from 2005 levels by 2035. Recent Conferences of the Parties have resulted in reaffirmations of the objectives of the Paris Agreement, calls for parties to eliminate certain fossil fuel subsidies and pursue reductions in non-carbon dioxide GHG emissions, agreements to transition away from fossil fuels in energy systems and increase renewable energy capacity, financial commitments to fund energy transition efforts in developing countries, and similar initiatives, though none legally binding. However, in January 2025, President Trump initiated the United States' withdrawal from the Paris Agreement and ordered the revocation of any related financial commitments. The impacts of the United States' withdrawal and other existing or future climate-related orders, pledges, agreements or any legislation or regulation promulgated in connection with the Paris Agreement, the Global Methane Pledge, or other international conventions cannot be predicted at this time. Further, state and local governments, financial institutions, and industry groups may elect to continue participating in international climate-related initiatives. Please refer to Regulation of the Oil and Natural Gas Industry in Part I, Items 1 and 2 of this Annual Report for further discussion on the topics referenced above and additional information on existing and proposed laws, regulations, treaties and international pledges intended to address GHGs and other climate change issues. Existing and future laws and regulations relating to climate change and GHG emissions could increase our costs, reduce demand for our products, limit our growth opportunities, impair our ability to develop our reserves and have other adverse effects on our business. Additionally, increasing concentrations of GHGs in the Earth's atmosphere may lead to changes in climate patterns that have significant physical effects, such as increasing frequency and severity of storms, fires, droughts, floods, and chronic shifts in temperature and precipitation patterns. These effects could adversely impact our assets and operations or those of our customers or suppliers. Litigation risks related to climate change have also increased in recent years as various states, municipalities, and other plaintiffs have brought suit against certain fossil fuel sector companies alleging either that the companies created public nuisances through their role in producing fuel or energy, the emissions resulting from the use of which contributed to climate change effects, or defrauded their investors by failing to adequately disclose the adverse climate change impacts those companies were aware of for some time. Though we have not been subject of such a lawsuit, any involvement in such could adversely affect our financial results. Finally, climate change concerns could impact our stock price and access to capital as certain stockholders, bondholders, and institutional lenders have elected to shift their investments to less carbon-intensive industries. Many U.S. and international banks have also made "net zero"emission commitments or signed-on to initiatives related to reducing GHG emissions. Any reduction in the availability of capital for us or our customers and suppliers could adversely impact our operations and financial performance.

As of December 31, 2024, 27% of our total estimated proved reserves were classified as proved undeveloped. Development of these proved undeveloped reserves may take longer and require higher levels of capital expenditures than we currently anticipate. Delays in the development of our reserves, increases in costs to drill and develop such reserves or decreases in commodity prices will reduce the value of our estimated PUDs and future net revenues estimated for such reserves and may result in some projects becoming uneconomic. In addition, delays in the development of reserves could cause us to have to reclassify our PUDs as unproved reserves. Further, we may be required to write-down our PUDs if we do not drill those wells within five years after their respective dates of booking.