| CANARGO ENERGY CORP ITEM 1A RISK FACTORS Reference is hereby made to the Section entitled “CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENT” with respect to certain qualifications regarding the following information |
| The risks described below are not the only ones facing the Company |
| Additional risks not presently known to us or that we currently deem immaterial may also impair our business operations and adversely affect the price of our shares |
| RISKS ASSOCIATED WITH OUR BUSINESS AND BUSINESS OPERATIONS WE HAVE EXPERIENCED RECURRING LOSSES For the fiscal years ended December 31, 2005, 2004, 2003, 2002, and 2001, we recorded net losses of dlra12cmam335cmam314, dlra4cmam757cmam000, dlra7cmam322cmam000, dlra5cmam328cmam000, and dlra13cmam218cmam000 respectively, and have an accumulated deficit of dlra117cmam201cmam506 as at December 31, 2005 |
| No impairment of oil and gas properties was recorded in 2005 or 2004 |
| The loss in 2003 included a writedown in our carrying value of the Bugruvativske Field in Ukraine of dlra4cmam790cmam000 to reflect the estimated recoverable amount from disposal, a write-off of the dlra1cmam275cmam000 debit balance in minority interest in Georgian American Oil Refinery (“GAOR”) due to a change in the intentions of our minority interest owner and plan to dispose of the asset, and a generator unit was impaired by dlra80cmam000 to reflect its fair value less cost to sell |
| Impairments of oil and gas properties, ventures and other assets in prior years include writedowns of dlra1cmam600cmam000 in 2002 and dlra11cmam160cmam000 in 2001 |
| No assurance can be given, however, that we will not experience operating losses or additional writedowns in the future |
| OUR ABILITY TO PURSUE OUR ACTIVITIES IS DEPENDENT ON OUR ABILITY TO GENERATE CASH FLOWS Our ability to continue to pursue our principal activities of acquiring interests in and developing oil and gas fields is dependent upon generating funds from internal sources, external sources and, ultimately, maintaining sufficient positive cash flows from operating activities |
| Our financial statements have been prepared on a basis which assumes that operating cash flows are realized and/or proceeds from additional financings and/or the sale of non-core assets are received to meet our cash flow needs |
| As a result of a private placement of our Senior Secured Notes due July 25, 2009 and our Senior Subordinated Convertible Guaranteed Notes due September 1, 2009, and based upon the current level of operations, we believe that, coupled with our cash flow from operations as well as the possibility, if required, of obtaining third party participation in our projects, we will have adequate capital to meet our anticipated existing requirements for working capital, capital expenditures, interest payments and scheduled principal payments for the next twelve months |
| However, development of the oil and gas properties and ventures in which we have interests involves multi-year efforts and substantial cash expenditures |
| Full development of these properties will require the availability of substantial funds from internal and/or external sources |
| Furthermore, unanticipated investment opportunities and operational difficulties may require unscheduled capital expenditures which may, in turn, require additional fund raising |
| No assurance can be given that we will be able to secure such funds or, if available, such funds can be obtained on commercially reasonable terms |
| OUR CURRENT OPERATIONS ARE DEPENDENT ON THE SUCCESS OF OUR GEORGIAN EXPLORATION ACTIVITIES AND OUR ACTIVITIES ON THE NINOTSMIND AND KYZYLOI FIELDS To date we have directed substantially all of our efforts and most of our available funds to the development of the Ninotsminda Field in the Kura Basin in the eastern part of Georgia, appraisal of the Manavi oil discovery, and 18 _________________________________________________________________ [54]Table of Contents exploration in that area and some ancillary activities in the Kura Basin area |
| This decision is based on management’s assessment of the promise of the Kura Basin area |
| More recently we have begun operations in Kazakhstan, particularly on the Kyzyloi Gas Field |
| Our focus on the Ninotsminda Field has over the past several years resulted in overall losses for us |
| We cannot assure investors that the exploration and development plans for the Ninotsminda Field or the Kyzyloi Gas Field will be successful |
| For example, the Ninotsminda Field may not produce sufficient quantities of oil and gas and at sufficient rates to justify the investment we have made and are planning to make in the Field, and we may not be able to produce the oil and gas at a sufficiently low cost or to market the oil and gas produced at a sufficiently high price to generate a positive cash flow and a profit |
| Furthermore, the maintenance of production levels from the Ninotsminda Field is subject to regular workover operations on the wells due to the friable nature of the reservoir and the need to remove sediment build-up from the production interval |
| Such operations will add additional costs and may not always be successful |
| Our Georgian exploration program, particularly in the Manavi and Norio areas, is an important factor for future success, and this program may not be successful, as it carries substantial risk |
| See “Our oil and gas activities involve risks, many of which are beyond our control” below for a description of a number of these potential risks and losses |
| In accordance with customary industry practices, we maintain insurance against some, but not all, of such risks and some, but not all, of such losses |
| The occurrence of an event not fully covered by insurance could have a material adverse effect on our financial condition and results of operations |
| OUR OPERATION OF THE NINOTSMINDA FIELD IS GOVERNED BY A PRODUCTION SHARING CONTRACT WHICH MAY BE SUBJECT TO CERTAIN LEGAL UNCERTAINTIES Our principal business and assets are derived from production sharing contracts in Georgia |
| The legislative and procedural regimes governing production sharing agreements and mineral use licenses in Georgia have undergone a series of changes in recent years resulting in certain legal uncertainties |
| Our production sharing agreements and mineral use licenses, entered into prior to the introduction in 1999 of a new Petroleum Law governing such agreements have not, as yet, been amended to reflect or ensure compliance with current legislation |
| As a result, despite references in the current legislation grandfathering the terms and conditions of our production sharing contracts, conflicts between the interpretation of our production sharing contracts and mineral use licenses and current legislation could arise |
| Such conflicts, if they arose, could cause an adverse effect on our rights under the production sharing contracts |
| WE MAY ENCOUNTER DIFFICULTIES IN ENFORCING OUR TITLE TO OUR PROPERTIES Since all of our oil and gas interests are currently held in countries where there is currently no private ownership of oil and gas in place, good title to our interests is dependent on the validity and enforceability of the governmental licenses and production sharing contracts and similar contractual arrangements that we enter into with government entities, either directly or indirectly |
| As is customary in such circumstances, we perform a minimal title investigation before acquiring our interests, which generally consists of conducting due diligence reviews and in certain circumstances securing written assurances from responsible government authorities or legal opinions |
| We believe that we have satisfactory title to such interests in accordance with standards generally accepted in the crude oil and natural gas industry in the areas in which we operate |
| Our interests in properties are subject to royalty interests, liens incident to operating agreements, liens for current taxes and other burdens, none of which we believe materially interferes with the use of, or affects the value of, such interests |
| However, as is discussed elsewhere, there is no assurance that our title to its interests will be enforceable in all circumstances due to the uncertain nature and predictability of the legal systems in some of the countries in which we operate |
| WE WILL REQUIRE ADDITIONAL FUNDS TO IMPLEMENT OUR LONG-TERM OIL AND GAS DEVELOPMENT PLANS It will take many years and substantial cash expenditures to develop fully our oil and gas properties |
| We generally have the principal responsibility to provide financing for our oil and gas properties and ventures |
| Accordingly, we may need to raise additional funds from outside sources in order to pay for project development costs |
| We may not be able to obtain that additional financing |
| If adequate funds are not available, we will be required to scale back or even suspend our operations or such funds may only be available on commercially unattractive terms |
| The carrying 19 _________________________________________________________________ [55]Table of Contents value of the Ninotsminda Field or the Kyzyloi Gas Field may not be realized unless additional capital expenditures are incurred to develop the Field |
| Furthermore, additional funds will be required to pursue exploration activities on our existing undeveloped properties |
| While expected to be substantial, without further exploration work and evaluation the amount of funds needed to fully develop all of our oil and gas properties cannot at present be quantified |
| WE MAY BE UNABLE TO FINANCE OUR OIL AND GAS PROJECTS Our long term ability to finance most of our present oil and gas projects and other ventures according to present plans is dependent upon obtaining additional funding |
| An inability to obtain financing in the future could require us to scale back or abandon part or all of our future project development, capital expenditure, production and other plans |
| The availability of equity or debt financing to us or to the entities that are developing projects in which we have interests is affected by many factors, including: - world and regional economic conditions; - the state of international relations; - the stability and the legal, regulatory, fiscal and tax policies of various governments in areas in which we have or intend to have operations; - fluctuations in the world and regional price of oil and gas and in interest rates; - the outlook for the oil and gas industry in general and in areas in which we have or intend to have operations; and - competition for funds from possible alternative investment projects |
| Potential investors and lenders will be influenced by their evaluations of us and our projects, including their technical difficulty, and comparison with available alternative investment opportunities |
| Finally, our ability to secure debt financing is subject to certain limitations |
| OUR OPERATIONS MAY BE SUBJECT TO THE RISK OF POLITICAL INSTABILITY, CIVIL DISTURBANCE AND TERRORISM Our principal oil and gas properties and activities are in Georgia and in Kazakhstan, both of which are, located in the former Soviet Union |
| Operation and development of our assets are subject to a number of conditions endemic to former Soviet Union countries, including political instability |
| The present governmental arrangements in countries of the former Soviet Union in which we operate were established relatively recently, when they replaced communist regimes |
| If they fail to maintain the support of their citizens, other institutions, including a possible reversion to totalitarian forms of government, could replace these governments |
| As recent developments in Georgia have illustrated, the national governments in these countries often must deal, from time to time, with civil disturbances and unrest which may be based on religious, tribal and local and regional separatist considerations |
| Our operations typically involve joint ventures or other participatory arrangements with the national government or state-owned companies |
| The production sharing contract covering the Ninotsminda Field is an example of such an arrangement |
| As a result of such dependency on government participants, our operations could be adversely affected by political instability, terrorism, changes in government institutions, personnel, policies or legislation, or shifts in political power |
| There is also the risk that governments could seek to nationalize, expropriate or otherwise take over our oil and gas properties either directly or through the enactment of laws and regulations which have an economically confiscatory result |
| We are not insured against political or terrorism risks because management deems the premium costs of such insurance to be currently prohibitively expensive |
| 20 _________________________________________________________________ [56]Table of Contents WE FACE THE RISK OF SOCIAL, ECONOMIC AND LEGAL INSTABILITY IN THE COUNTRIES IN WHICH WE OPERATE The political institutions of the countries that were a part of the former Soviet Union have recently become more fragmented, and the economic institutions of these countries have recently converted to a market economy from a planned economy |
| New laws have recently been introduced, and the legal and regulatory regimes in such regions may be vague, containing gaps and inconsistencies, and are subject to amendment |
| Application and enforceability of these laws may also vary widely from region to region within these countries |
| Due to this instability, former Soviet Union countries are subject to certain additional risks including the uncertainty as to the enforceability of contracts |
| Social, economic and legal instability have accompanied these changes due to many factors which include: - low standards of living; - high unemployment; - under-developed and changing legal and social institutions; and - conflicts within and with neighbouring countries |
| This instability could make continued operations difficult or impossible |
| Georgia has democratically elected a new President following a popular revolt against the previous administration in November 2003 and has successfully quelled a potential separatist uprising in one of its regions |
| Although the new Georgian administration has made public statements supporting foreign investment in Georgia, and specific written support for our activities, there can be no guarantee that this will continue, or that these changes will not have an adverse affect on our operations |
| There are also some separatist areas within Georgia that may cause instability and potentially affect our activities |
| WE FACE AN INADEQUATE OR DETERIORATING INFRASTRUCTURE IN THE COUNTRIES IN WHICH WE OPERATE Countries in the former Soviet Union may either have underdeveloped infrastructures or, as a result of shortages of resources, have permitted infrastructure improvements to deteriorate |
| The lack of necessary infrastructure improvements can adversely affect operations |
| For example, we have, in the past, suspended drilling and testing procedures due to the lack of a reliable power supply in Georgia |
| WE MAY ENCOUNTER CURRENCY RISKS IN THE COUNTRIES IN WHICH WE OPERATE Payment for oil and gas products sold in former Soviet Union countries may be in local currencies |
| Although we currently sell our oil principally for US dollars, we may not be able to continue to demand payment in hard currencies in the future |
| Most former Soviet Union country currencies are presently convertible into US dollars, but there is no assurance that such convertibility will continue |
| Even if currencies are convertible, the rate at which they convert into US dollars is subject to fluctuation |
| In addition, the ability to transfer currencies into or out of former Soviet Union countries may be restricted or limited in the future |
| We may enter into contracts with suppliers in former Soviet Union countries to purchase goods and services in US dollars |
| We may also obtain from lenders credit facilities or other debt denominated in US dollars |
| If we cannot receive payment for oil and oil products in US dollars and the value of the local currency relative to the US dollar deteriorates, we could face significant negative changes in working capital |
| WE MAY ENCOUNTER TAX RISKS IN THE COUNTRIES IN WHICH WE OPERATE Countries may add to or amend existing taxation policies in reaction to economic conditions including state budgetary and revenue shortfalls |
| Since we are dependent on international operations, specifically those in Georgia 21 _________________________________________________________________ [57]Table of Contents and in Kazakhstan, we may be subject to changing taxation policies including the possible imposition of confiscatory excess profits, production, remittance, export and other taxes |
| While we are not aware of any recent or proposed tax changes which could materially adversely affect our operations, such changes could occur although we have negotiated economic stabilization clauses in our production sharing contracts in Georgia and all current taxes are payable from the State’s share of petroleum produced under the production sharing contracts |
| WE HAVE IDENTIFIED MATERIAL WEAKNESSES IN OUR INTERNAL CONTROLS OVER FINANCIAL REPORTING WHICH, IF NOT REMEDIATED, MAY ADVERSELY AFFECT OUR ABILITY TO TIMELY AND ACCURATELY MEET OUR FINANCIAL REPORTING RESPONSIBILITIES We have identified a number of material weakness in our evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2005 (see Part II, Item 9A Control and Procedures) |
| We plan to undertake a process to remediate the identified material weaknesses; however our failure to complete this remediation process may adversely affect our ability to accurately report our financial results in a timely manner |
| We also believe that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) were ineffective as of December 31, 2005 |
| We believe that the material weaknesses identified in our evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2005 mean that we cannot fully ensure that the information required to be disclosed by us in the reports we file or submit under the Exchange Act with the Commission (1) is recorded, processed, summarized and processed within the time period specified in the Commission’s rules and forms and (2) is accumulated and communicated to the management, including principal executives and principal financial officers, as appropriate to allow timely decisions regarding required disclosure |
| OUR ABILITY TO INCUR ADDITIONAL INDEBTEDNESS IS RESTRICTED UNDER THE TERMS OF THE SENIOR SECURED AND SUBORDINATED NOTES Pursuant to the terms of (i) the Note Purchase Agreement dated July, 25, 2005 entered into by and between CanArgo and the purchasers of the Senior Secured Notes due July, 25, 2009 (“Senior Secured Notes”) and (ii) the Note and Warrant Purchase Agreement dated March 3, 2006 entered into by and between CanArgo and the purchasers of the Senior Subordinated Convertible Guaranteed Notes due September 1, 2009 (“Subordinated Notes”), we may not incur future indebtedness or issue additional senior or pari passu indebtedness, except with the prior consent of the beneficial holders of at least 51prca of the outstanding principal amount of the Senior Secured Notes and 50prca of the outstanding principal amount of the Subordinated Notes, or in limited permitted circumstances |
| The definition of indebtedness in the Note Purchase Agreement and Note and Warrant Purchase Agreement encompasses all customary forms of indebtedness, including, without limitation, liabilities for deferred consideration, liabilities for borrowed money secured by any lien or other specified security interest (except permitted liens), liabilities in respect of letters of credit or similar instruments (excluding letters of credit which are 100prca cash collateralized) and guarantees in relation to such forms of indebtedness (excluding parent company guarantees provided by CanArgo in respect of the indebtedness or obligations of any of our subsidiaries under any Basic Documents, as defined in the Note and Note and Warrant Purchase Agreements) |
| RISKS ASSOCIATED WITH OUR INDUSTRY WE MAY BE REQUIRED TO WRITE-OFF UNSUCCESSFUL PROPERTIES AND PROJECTS In order to realize the carrying value of our oil and gas properties and ventures, we must produce oil and gas in sufficient quantities and then sell such oil and gas at sufficient prices to produce a profit |
| We have a number of unevaluated oil and gas properties |
| The risks associated with successfully developing unevaluated oil and gas properties are even greater than those associated with successfully continuing development of producing oil and gas properties, since the existence and extent of commercial quantities of oil and gas in unevaluated properties have not 22 _________________________________________________________________ [58]Table of Contents been established |
| We could be required in the future to write-off our investments in additional projects, including the Ninotsminda Field project, if such projects prove to be unsuccessful |
| OUR OIL AND GAS ACTIVITIES INVOLVE RISKS, MANY OF WHICH ARE BEYOND OUR CONTROL Our exploration, development and production activities are subject to a number of factors and risks, many of which may be beyond our control |
| We must first successfully identify commercial quantities of oil and gas, which is inherently subject to many uncertainties |
| Thereafter, the development of an oil and gas deposit can be affected by a number of factors which are beyond the operator’s control, such as: - unexpected or unusual geological conditions; - the recoverability of the oil and gas on an economic basis; - the availability of infrastructure and personnel to support operations; - labour disputes; - local and global oil prices; and - government regulation and legal and political uncertainties |
| Our activities can also be affected by a number of hazards, including, without limitation: - natural phenomena, such as bad weather; - operating hazards, such as fires, explosions, blow-outs, pipe failures and casing collapses; and - environmental hazards, such as oil spills, gas leaks, ruptures and discharges of toxic gases |
| Any of these factors or hazards could result in damage, losses or liability for us |
| There is also an increased risk of some of these hazards in connection with operations that involve the rehabilitation of fields where less than optimal practices and technology were employed in the past, as was often the case in the countries that were part of the former Soviet Union |
| Risks associated with bad weather apply in particular to the Kyzyloi and Akkulka areas in Kazakhstan which has extremes of winter and summer temperatures and where extremely low winter temperatures and snow may hamper and delay operations and potentially affect production |
| This particular risk applies to a lesser extent in Georgia, but we have experienced delays due to extreme snowfall and winter conditions and earthquakes |
| We do not purchase insurance covering all of the risks and hazards or all of our potential liability that are involved in oil and gas exploration, development and production |
| WE MAY HAVE CONFLICTING INTERESTS WITH OUR PARTNERS Joint venture, acquisition, financing and other agreements and arrangements must be negotiated with independent third parties and, in some cases, must be approved by governmental agencies |
| These third parties generally have objectives and interests that may not coincide with ours and may conflict with our interests |
| This would apply to our projects both in Georgia and in Kazakhstan |
| Unless we are able to compromise these conflicting objectives and interests in a mutually acceptable manner, agreements and arrangements with these third parties will not be consummated |
| We may not have a majority of the equity in the entity that is the licensed developer of some projects that we may pursue in the countries that were a part of the former Soviet Union, even though we may be the designated operator of the oil or gas field |
| In these circumstances, the concurrence of co-venturers may be required 23 _________________________________________________________________ [59]Table of Contents for various actions |
| Other parties influencing the timing of events may have priorities that differ from ours, even if they generally share our objectives |
| Demands by or expectations of governments, co-venturers, customers, and others may affect our strategy regarding the various projects |
| Failure to meet such demands or expectations could adversely affect our participation in such projects or our ability to obtain or maintain necessary licenses and other approvals |
| OUR OPERATING DIRECT AND INDIRECT SUBSIDIARIES AND JOINT VENTURES REQUIRE GOVERNMENTAL REGISTRATION Operating entities in various foreign jurisdictions must be registered by governmental agencies, and production licenses and contracts for the development of oil and gas fields in various foreign jurisdictions must be granted by governmental agencies |
| These governmental agencies generally have broad discretion in determining whether to take or approve various actions and matters |
| In addition, the policies and practices of governmental agencies may be affected or altered by political, economic and other events occurring either within their own countries or in a broader international context |
| WE ARE AFFECTED BY CHANGES IN THE MARKET PRICE OF OIL AND GAS Prices for oil and natural gas and their refined products are subject to wide fluctuations in response to a number of factors which are beyond our control, including: - global and regional changes in the supply and demand for oil and natural gas; - actions of the Organization of Petroleum Exporting Countries; - weather conditions; - domestic and foreign governmental regulations; - the price and availability of alternative fuels; - political conditions and terrorist activity in the Middle East, Caucasus, Central Asia and elsewhere; and - overall global and regional economic conditions |
| A reduction in oil prices can affect the economic viability of our operations |
| There can be no assurance that oil prices will be at a level that will enable us to operate at a profit |
| We may also not benefit from rapid increases in oil prices as the market for the levels of crude oil produced in Georgia by NOC can in such an environment be relatively inelastic |
| Contract prices are often set at a specified price determined with reference to world market prices (often based on the average of a number of quotations for “marker” crude including Dated Brent Mediterranean or Urals Mediterranean at the time of sale) subject to appropriate discounts for transportation and other charges which can vary from contract to contract |
| OUR ACTUAL OIL AND GAS PRODUCTION COULD VARY SIGNIFICANTLY FROM RESERVE ESTIMATES Estimates of oil and natural gas reserves and their values by petroleum engineers are inherently uncertain |
| These estimates are based on professional judgments about a number of elements: - the amount of recoverable crude oil and natural gas present in a reservoir; - the costs that will be incurred to produce the crude oil and natural gas; 24 _________________________________________________________________ [60]Table of Contents and - the rate at which production will occur |
| Reserve estimates are also based on evaluations of geological, engineering, production and economic data |
| The data can change over time due to, among other things: - additional development activity; - evolving production history; and - changes in production costs, market prices and economic conditions |
| As a result, the actual amount, cost and rate of production of oil and gas reserves and the revenues derived from sale of the oil and gas produced in the future will vary from those anticipated in the reports on the oil and gas reserves prepared by independent petroleum consultants at any given point in time |
| The magnitude of those variations may be material |
| The rate of production from crude oil and natural gas properties declines as reserves are depleted |
| Except to the extent we acquire additional properties containing proved reserves, conduct successful exploration and development activities or, through engineering studies, identify additional productive zones in existing wells or secondary recovery reserves, our proved reserves will decline as reserves are produced |
| Future crude oil and natural gas production is therefore highly dependent upon our level of success in replacing depleted reserves |
| OUR OIL AND GAS OPERATIONS ARE SUBJECT TO EXTENSIVE GOVERNMENTAL REGULATION Governments at all levels, national, regional and local, regulate oil and gas activities extensively |
| We must comply with laws and regulations which govern many aspects of our oil and gas business, including: - exploration; - development; - production; - refining; - marketing; - transportation; - occupational health and safety; - labour standards; and - environmental matters |
| We expect the trend towards more burdensome regulation of our business to result in increased costs and operational delays |
| This trend is particularly applicable in developing economies, such as those in the countries that were a part of the former Soviet Union where we have our principal operations |
| In these countries, the evolution towards a more developed economy is often accompanied by a move towards the more burdensome regulations that typically exist in more developed economies |
| 25 _________________________________________________________________ [61]Table of Contents WE FACE SIGNIFICANT COMPETITION The oil and gas industry is highly competitive |
| Our competitors include integrated oil and gas companies, government owned oil companies, independent oil and gas companies, drilling and income programs, and wealthy individuals |
| Many of our competitors are large, well-established, well-financed companies |
| Because of our small size and lack of financial resources, we may not be able to compete effectively with these companies |
| OUR PROFITABILITY MAY BE SUBJECT TO CHANGES IN INTEREST RATES Our profitability may also be adversely affected during any period of unexpected or rapid increase in interest rates |
| While our current long term debt has fixed interest rates, increases in interest rates may adversely affect our ability to raise debt capital to the extent that our income from operations will be insufficient to cover debt service |
| RISKS ASSOCIATED WITH OUR STOCK LIMITED TRADING VOLUME IN OUR COMMON STOCK MAY CONTRIBUTE TO PRICE VOLATILITY Our common stock is listed for trading on the Oslo Stock Exchange (“OSE”) in Norway, and on The American Stock Exchange (“AMEX”) in New York |
| Prior to the listing on the AMEX, our stock was traded on the Over the Counter Bulletin Board in the United States and on the OSE During the 12 months ended December 31, 2005, the average daily trading volume for our common stock on the OSE was 3cmam726cmam418 shares and 1cmam723cmam540 shares on the AMEX both as reported by Yahoo and the closing price of our stock during such period ranged from a low of NOK 4dtta45 and dlra0dtta66 to a high of NOK 14dtta10 and dlra2dtta25 on the OSE and AMEX, respectively, as reported by Yahoo |
| As a relatively small company with a limited market capitalization, even if our shares are more widely disseminated, we are uncertain as to whether a more active trading market in our common stock will develop |
| As a result, relatively small trades may have a significant impact on the price of our common stock |
| THE PRICE OF OUR COMMON STOCK MAY BE SUBJECT TO WIDE FLUCTUATIONS The market price of our common stock could be subject to wide fluctuations in response to quarterly variations in our results of operations, changes in earnings estimates by analysts, changing conditions in the oil and gas industry or changes in general market, economic or political conditions |
| WE DO NOT ANTICIPATE PAYING CASH DIVIDENDS IN THE FORESEEABLE FUTURE We have not paid any cash dividends to date on the common stock and there are no plans for such dividend payments in the foreseeable future |