1125057--2/25/2010--ENCORE_ACQUISITION

related topics

{gas, price, oil}

{acquisition, growth, future}

{loss, insurance, financial}

{debt, indebtedness, cash}

{operation, natural, condition}

{cost, regulation, environmental}

{competitive, industry, competition}

{condition, economic, financial}

{loan, real, estate}

Oil and natural gas prices are very volatile. A decline in commodity prices could materially and adversely affect our financial condition, results of operations, liquidity, and cash flows. An increase in the differential between benchmark prices of oil and natural gas and the wellhead price we receive could adversely affect our financial condition, results of operations, and cash flows. Price declines may result in a write-down of our asset carrying values, which could have a material adverse effect on our results of operations and limit our ability to borrow funds under our revolving credit facility. Our commodity derivative contract activities could result in financial losses or could reduce our income and cash flows. Furthermore, in the future, our commodity derivative contract positions may not adequately protect us from changes in commodity prices. The counterparties to our derivative contracts may not be able to perform their obligations to us, which could materially affect our cash flows and results of operations. Our estimated proved reserves are based on many assumptions that may prove to be inaccurate. Any material inaccuracies in these reserve estimates or underlying assumptions will materially affect the quantities and present value of our reserves. Developing and producing oil and natural gas are costly and high-risk activities with many uncertainties that could adversely affect our financial condition or results of operations. Secondary and tertiary recovery techniques may not be successful, which could adversely affect our financial condition or results of operations. Shortages of rigs, equipment, and crews could delay our operations. If we do not make acquisitions, our future growth could be limited. Any acquisitions we complete are subject to substantial risks that could adversely affect our financial condition and results of operations. A substantial portion of our producing properties is located in one geographic area and adverse developments in any of our operating areas would negatively affect our financial condition and results of operations. We depend on certain customers for a substantial portion of our sales. If these customers reduce the volumes of oil and natural gas they purchase from us, our revenues and cash available for distribution will decline to the extent we are not able to find new customers for our production. Competition in the oil and natural gas industry is intense and many of our competitors have greater resources than we do. As a result, we may be unable to effectively compete with larger competitors. We have significant indebtedness and may incur significant additional indebtedness, which could negatively impact our financial condition, results of operations, and business prospects. We are unable to predict the impact of the recent downturn in the credit markets and the resulting costs or constraints in obtaining financing on our business and financial results. Our revolving credit facilities have substantial restrictions and financial covenants that may restrict our business and financing activities. Our operations are subject to operational hazards and unforeseen interruptions for which we may not be adequately insured. Our business depends in part on gathering and transportation facilities owned by others. Any limitation in the availability of those facilities could interfere with our ability to market our oil and natural gas production and could harm our business. We have limited control over the activities on properties we do not operate. We are subject to complex federal, state, local, and other laws and regulations that could adversely affect the cost, manner, or feasibility of conducting our operations. Possible regulations related to global warming and climate change could have an adverse effect on our operations and the demand for oil and natural gas. Our operations expose us to significant costs and liabilities with respect to environmental and operational safety matters. Our development and exploratory drilling efforts may not be profitable or achieve our targeted returns. Our development, exploitation, and exploration operations require substantial capital, and we may be unable to obtain needed financing on satisfactory terms.

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1125057--2/25/2010--ENCORE_ACQUISITION_CO