Regulations with respect to the Company’s operations govern, among other things, engineering and construction specifications for production facilities, safety procedures, plugging and abandonment of wells and removal of facilities in the U.S. Gulf of America.

As of September 30, 2025, the Company had outstanding performance bonds from third party sureties totaling $1.5 billion. The ongoing cost of maintaining these bonds is reflected as “Interest expense” on the Condensed Consolidated Statements of Operations. Additionally, as of September 30, 2025, the Company had letters of credit issued under its Bank Credit Facility totaling $43.3 million. Letters of credit that are outstanding reduce the available revolving credit commitments.

Subsequent Event — On November 3, 2025, the Company entered into arrangements with its surety providers to establish limits on the amount of aggregate collateral that such surety providers can require the Company to post, with annual collateral funding commitments as set forth in the table below. The arrangements also require the Company to spend a minimum amount on plugging and abandonment activities each year. For the three years commencing January 1, 2026 and for the subsequent two years commencing January 1, 2029, the Company is required to spend $90.0 million and $45.0 million on these activities on an annual basis, respectively.

The table below outlines the estimated collateral funding commitments under the arrangements upon execution (in thousands):


Period	Collateral Funding Commitments
Remaining 2025	$	39,548
2026		42,108
2027		43,289
2028		42,202
2029		42,298
Thereafter		82,136
Total	$	291,581

The collateral funding commitments may be secured by cash or letters of credit which will reduce the Company’s liquidity. Collateral funded with cash will be reflected as “Restricted cash” within the Condensed Consolidated Balance Sheets. The collateral funding commitments, and ultimately any posted cash collateral, will be reduced as plugging and abandonment activities are completed and underlying surety bonds are released.

The Company has firm transportation agreements in place with pipeline carriers for future transportation of oil and gas production wherein the Company is obligated to transport minimum monthly volumes or pay for any deficiencies. As of September 30, 2025, the future minimum transportation payments under the Company’s commitments total approximately $45.8 million for years 2025 through 2030. Our production is currently expected to exceed the minimum monthly volume in the periods provided in the agreements.

From time to time, the Company is involved in litigation, disputes related to our business, regulatory examinations and administrative proceedings primarily arising in the ordinary course of business in jurisdictions in which the Company does business. Although the outcome of these matters cannot be predicted with certainty, the Company’s management believes none of these matters, either individually or in the aggregate, would have a material effect upon the Company’s financial position; however, an unfavorable outcome could have a material adverse effect on the Company’s results from operations for a specific interim period or year.

Decommissioning in the U.S. is governed by both federal and state laws and regulations. In federal waters, decommissioning is governed by federal laws and regulations, while decommissioning in state waters falls primarily under state laws and regulations. Louisiana, Alabama and Mississippi state waters extend three nautical miles from their respective shorelines; however, Texas state waters extend approximately nine nautical miles from its shoreline. The Company, as a co-lessee or predecessor-in-interest in oil and natural gas leases located in the U.S. Gulf of America, is in the chain of title with unrelated third parties either directly or by virtue of divestiture of certain oil and natural gas assets previously owned and assigned by our subsidiaries. Certain counterparties in these divestiture transactions or third parties in existing leases have filed for bankruptcy protection or undergone associated reorganizations and may not be able to perform required abandonment obligations. Both federal and state laws and regulations could require the Company to assume such obligations. The Company reflects such costs as “Other operating (income) expense” on the Condensed Consolidated Statements of Operations.

The decommissioning obligations included are in the Condensed Consolidated Balance Sheets as “Other current liabilities” and “Other long-term liabilities”, and the changes in that liability were as follows (in thousands):


Decommissioning Obligations at December 31, 2024	$	20,002
Changes in estimate		235
Settlements		(1,227	)
Decommissioning Obligations at September 30, 2025	$	19,010
Less: Current portion at September 30, 2025		7,953
Long-term portion at September 30, 2025	$	11,057

Although it is reasonably possible that the Company could receive state or federal decommissioning orders in the future or be notified of defaulting third parties in existing leases, the Company cannot predict with certainty, if, how or when such orders or notices will be resolved or estimate a possible loss or range of loss that may result from such orders. However, the Company could incur judgments, enter into settlements or revise its opinion regarding the outcome of certain notices or matters, and such developments could have a material adverse effect on its results of operations in the period in which the amounts are accrued and its cash flows in the period in which the amounts are paid.

In connection with the Company’s entry into the QuarterNorth Merger Agreement, on March 4, 2024, the Company entered into a registration rights agreement (the “QNE Registration Rights Agreement”) with certain stockholders of QuarterNorth (collectively, the “RRA Holders”). Pursuant to the QNE Registration Rights Agreement, the Company granted the RRA Holders certain demand, “piggy-back” and shelf registration rights with respect to the shares of the Company’s common stock received in connection with the QuarterNorth Acquisition, subject to certain customary thresholds and conditions. There have been no amendments to the QNE Registration Rights Agreement since the filing of the Company’s 2024 Annual Report.