1133494--5/11/2009--FOOTHILLS_RESOURCES

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RISKS RELATED TO OUR CHAPTER 11 BANKRUPTCY PROCEEDINGS We filed for reorganization under Chapter 11 of the Bankruptcy Code on February 11, 2009, and we do not presently believe that there will be any meaningful recovery, or any recovery at all, for holders of our common stock. We intend to deregister our common stock under the Securities Exchange Act of 1934, which could negatively affect the liquidity and trading prices of our common stock. Our operations are subject to the risks and uncertainties associated with the Chapter 11 Cases. Our liquidity position imposes significant risks to our operations. We may not continue to operate as a going concern. Our credit facility will expire on May 19, 2009, unless a plan of reorganization is approved by the Bankruptcy Court by that date or we are able to obtain an extension. We may not be able to obtain confirmation of our plan of reorganization. Transfers of our equity, or issuances of equity in connection with our restructuring, may impair our ability to utilize our federal income tax net operating loss carryforwards in future years. RISKS RELATED TO OUR BUSINESS Our debt may negatively impact our liquidity, limit our ability to obtain additional financing and harm our competitive position. We may need to finance ordinary business operations through borrowings under our DIP Credit Agreement. As a result our flexibility in operating our business and our ability to repay our indebtedness may be limited as a result of certain covenant restrictions in the DIP Credit Agreement. The Company must comply with various covenants to maintain access to financing under the DIP Credit Agreement and its right to use the pre-petition lenders cash collateral. We may not be able to generate sufficient cash flow to service our outstanding debt and fund operations. We have a limited operating history for you to evaluate our business. We had net losses in recent years and may never attain profitability. Our lack of diversification has had a negative effect on our financial condition and results of operations and increases the risk of an investment in Foothills. Strategic relationships upon which we may rely are subject to change, which may diminish our ability to conduct our operations. Competition in obtaining rights to explore and develop oil and gas reserves and to market our production may impair our business. Our hedging activities could result in financial losses or could reduce our net income, which may adversely affect an investment in our common stock. The recent global credit and financial crisis could have adverse effects on the Company. RISKS RELATED TO OUR INDUSTRY Drilling for oil and gas is risky and may not be commercially successful, and the 3D seismic data and other advanced technologies we use cannot eliminate exploration risk, which could impair our ability to generate revenues from our operations. We may not be able to develop oil and gas reserves on an economically viable basis, and our reserves and production may decline as a result. Estimates of oil and natural gas reserves that we make may be inaccurate and our actual revenues may be lower than our reserve report projections. Drilling new wells could result in new liabilities, which could endanger our interests in our properties and assets. Decommissioning costs are unknown and may be substantial. Unplanned costs could divert resources from other projects. Our inability to obtain necessary facilities could hamper our operations. We may have difficulty distributing our production, which could harm our financial condition. Prices and markets for oil and natural gas are unpredictable and tend to fluctuate significantly, which could reduce profitability, growth and the value of our business. Increases in our operating expenses will impact our operating results and financial condition. Penalties we may incur could impair our business. Environmental risks may adversely affect our business. Our business will suffer if we cannot obtain or maintain necessary licenses. Challenges to title to our properties may impact our financial condition. We will rely on technology to conduct our business and our technology could become ineffective or obsolete. RISKS RELATED TO OUR COMMON STOCK There has been a limited trading market for our common stock and no market for our warrants. You may have difficulty trading and obtaining quotations for our common stock or warrants. The market price of our common stock is, and is likely to continue to be, highly volatile and subject to wide fluctuations. Our operating results may fluctuate significantly, and these fluctuations may cause the price of our common stock and our warrants to decline.

Full 10-K form ▸

1133494--5/11/2009--FOOTHILLS_RESOURCES_INC