1405073--3/13/2009--Approach_Resources

related topics

{gas, price, oil}

{operation, natural, condition}

{debt, indebtedness, cash}

{cost, regulation, environmental}

{acquisition, growth, future}

{loss, insurance, financial}

{stock, price, operating}

{competitive, industry, competition}

{investment, property, distribution}

{customer, product, revenue}

{personnel, key, retain}

{regulation, change, law}

{condition, economic, financial}

The deterioration of global economic and financial conditions and an extended decline in the price of oil and natural gas would negatively impact our business, financial condition and results of operations. If credit and capital markets do not improve, we may not be able to obtain funding under our current revolving credit facility or fund on acceptable terms. The inability to obtain funding could deter or prevent us from meeting our future capital needs to fund our development program. Our lenders can limit our borrowing capabilities, which may materially impact our operations. Drilling and exploring for, and producing, oil and gas are high risk activities with many uncertainties that could adversely affect our business, financial condition or results of operations. Currently, all of our producing properties are located in four counties in Texas, and our proved reserves are primarily attributable to three fields, making us vulnerable to risks associated with having our production concentrated in a small area. We have leases and options for undeveloped acreage that may expire in the near future. Identified drilling locations that we decide to drill may not yield gas or oil in commercially viable quantities and are susceptible to uncertainties that could materially alter the occurrence or timing of their drilling. Unless we replace our oil and gas reserves, our reserves and production will decline. Our actual production, revenues and expenditures related to our reserves are likely to differ from our estimates of our proved reserves. We may experience production that is less than estimated and drilling costs that are greater than estimated in our reserve reports. These differences may be material. The unavailability or high cost of drilling rigs, equipment, supplies, personnel and oilfield services could adversely affect our ability to execute our exploration and development plans on a timely basis and within our budget. Competition in the oil and gas industry is intense, and many of our competitors have resources that are greater than ours. Our customer base is concentrated, and the loss of our key customers could, therefore, adversely affect our financial results. We depend on our management team and other key personnel. Accordingly, the loss of any of these individuals could adversely affect our business, financial condition and the results of operations and future growth. We have three affiliated stockholders who, together with our board and management, have a 42.5% interest in our company, whose interests may differ from your interests and who will be able to control or substantially influence the outcome of matters voted upon by our stockholders. We have renounced any interest in specified business opportunities, and certain members of our board of directors and certain of our stockholders generally have no obligation to offer us those opportunities. We are subject to complex governmental laws and regulations that may adversely affect the cost, manner or feasibility of doing business. Changes in tax laws may adversely affect our results of operations and cash flows. Operating hazards, natural disasters or other interruptions of our operations could result in potential liabilities, which may not be fully covered by our insurance. Our results are subject to quarterly and seasonal fluctuations. Market conditions or transportation impediments may hinder our access to oil and gas markets or delay our production. Environmental liabilities may expose us to significant costs and liabilities. Our growth strategy could fail or present unanticipated problems for our business in the future, which could adversely affect our ability to make acquisitions or realize anticipated benefits of those acquisitions. Severe weather could have a material adverse impact on our business. A terrorist attack or armed conflict could harm our business. Risks related to our financial condition We will require additional capital to fund our future activities. If we fail to obtain additional capital, we may not be able to fully implement our business plan, which could lead to a decline in reserves. Our bank lenders can limit our borrowing capabilities, which may materially impact our operations.

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1405073--3/13/2009--Approach_Resources_Inc