893813--4/14/2009--PENN_OCTANE

related topics

{gas, price, oil}

{operation, natural, condition}

{cost, regulation, environmental}

{debt, indebtedness, cash}

{acquisition, growth, future}

{loss, insurance, financial}

{competitive, industry, competition}

{loan, real, estate}

Our oil and natural gas reserves naturally decline, and we will need to make accretive acquisitions or incur substantial capital expenditures in order to maintain or grow our asset base. To fund our substantial capital expenditures, we will be required to use cash generated from our operations, additional borrowings or the issuance of additional equity or debt securities, or some combination thereof. Oil and natural gas prices are very volatile. A decline in commodity prices will cause a decline in our cash flow from operations. An increase in the differential between the NYMEX or other benchmark prices of oil and natural gas and the wellhead price we receive could adversely affect our financial condition. Future 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. Our commodity derivative contract activities could result in financial losses or could reduce our income, which may adversely affect our 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. Shortages of rigs, equipment and crews could delay our operations and reduce our cash available for distribution. If we do not make acquisitions on economically acceptable terms, our future growth will be limited. Any acquisitions we complete are subject to substantial risks. Due to our lack of geographic diversification, adverse developments in our operating areas would reduce our results from operations. We may be unable to compete effectively with larger companies, which may adversely affect our results from operations. Our future debt levels may limit our flexibility to obtain additional financing and pursue other business opportunities and may affect our results of operations. 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. Our pipeline integrity program may subject us to significant costs and liabilities. Our business would be adversely affected if operations at our terminaling, transportation and distribution facilities experienced significant interruptions. Our business would also be adversely affected if the operations of our customers and suppliers experienced significant interruptions. The occurrence or threat of extraordinary events, including domestic and international terrorist attacks, and laws and regulations related thereto may disrupt our operations and decrease demand for our products and services. We are subject to many environmental and safety regulations that may result in significant unanticipated costs or liabilities or cause interruptions in our operations. We store and transport hazardous or volatile chemicals at some of our facilities. If our safety procedures are not effective, an accident involving these other hazardous or volatile chemicals could result in serious injuries or death, or result in the shutdown of our facilities.

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893813--4/14/2009--PENN_OCTANE_CORP