Output Explorer

Based on the operational profile and strategic focus described in Range Resources' MD&A, combined with market conditions prevailing as of late 2015 and early 2019, here is an analysis of the potential risks facing the company in the fiscal year 2020.

1. Commodity Price Volatility (Natural Gas Focus)

The most significant risk for Range Resources in 2020 remains its heavy exposure to natural gas prices. The MD&A explicitly states that revenues and profitability depend "substantially" on prevailing prices. While crude oil prices recovered significantly from the 2014-2016 lows by early 2019, the natural gas market has faced structural oversupply and regional pricing disparities.

• The Risk: If Henry Hub natural gas prices remain depressed (below $3.00/MMBtu) or decline further due to a global economic slowdown or increased LNG export delays, Range's operating margins could compress severely. Unlike pure-play oil producers who saw a robust recovery in 2017-2018, gas-weighted portfolios like Range's have struggled to generate strong free cash flow when gas prices are low.
• Regional Basis Differentials: As an operator primarily in the Appalachian region (Marcellus/Utica), Range is susceptible to local basis differentials. If infrastructure capacity (pipelines) in Appalachia does not keep pace with production growth, the "basis" (the difference between local wellhead price and the NYMEX benchmark) could widen negatively, effectively lowering realized prices despite stable national benchmarks.

2. Capital Allocation and Balance Sheet Constraints

Range's stated strategy is "returns focused growth... on a per share debt-adjusted basis." This indicates a priority on deleveraging and maintaining liquidity over aggressive expansion.

• The Risk: In a 2020 environment where interest rates might rise (as seen in the trajectory from 2015 through 2018) or if credit markets tighten following the oil-price volatility cycles of previous years, refinancing existing debt at favorable terms could become difficult. High leverage acts as a multiplier during downturns; if production growth requires capital outlays while commodity prices soften, the company may face pressure to sell assets ("divestitures of non-core assets") at distressed valuations to service debt, potentially undermining long-term reserve growth.

3. Execution Risk in the Appalachian Basin

The company operates primarily in the Appalachian region (Marcellus and Utica shales). While these plays are known for low breakeven costs compared to other US basins, they present specific operational challenges.

• Liquidity Management: A key operational challenge in the Marcellus/Utica is managing NGL liquids versus dry gas. Fluctuations in NGL prices relative to natural gas can impact the economics of horizontal drilling. If NGL prices collapse in 2020, the value proposition of drilling longer laterals designed to capture more liquids diminishes.
• Infrastructure Bottlenecks: The rapid development of the Appalachian basin over the last five years has occasionally outpaced pipeline takeaway capacity. Continued high-intensity drilling in 2020 without corresponding midstream investment could lead to flaring restrictions or increased shrinkage, directly impacting effective production volumes and revenue.

4. Regulatory and Environmental Uncertainty

As of early 2019, the regulatory landscape for hydraulic fracturing and methane emissions remains a volatile variable.

• The Risk: Increased federal or state-level scrutiny regarding methane emissions, water usage, or seismic activity induced by wastewater disposal could lead to new permitting hurdles or operational restrictions. Given Range's concentration in Pennsylvania and Ohio, any tightening of regulations in these specific jurisdictions would disproportionately affect their ability to execute their "internally generated drilling projects" efficiently, potentially increasing development costs and delaying production ramp-ups.

5. Market Expectations vs. Realized Growth

Management targets "annual production growth within operatin[g]" limits, though the text cuts off, implying a disciplined approach.

• The Risk: There is a risk of missing guidance if the cost of materials (steel, frac sand, fuel) rises in 2020. The oil services sector saw inflationary pressures starting in 2018; if these persist into 2020, the "low breakeven" advantage of the Marcellus play could be eroded. Furthermore, if the "per share debt-adjusted" metric becomes difficult to maintain due to dilution or high debt service costs, equity investors may re-rate the stock lower, limiting the company's ability to raise capital for future acquisitions or development.

Conclusion: For the 2020 fiscal year, Range Resources faces a "perfect storm" scenario if natural gas prices fail to recover above $3.50/MMBtu. The company's success hinges on its ability to maintain low breakeven costs in the face of potential input inflation, manage debt loads without excessive dilution, and navigate regional basis differentials in Appalachia. The primary danger lies in a divergence between management's "debt-adjusted" growth targets and the reality of a potentially soft natural gas price environment.

Based on the provided MD&A excerpt and the fundamental operating profile of Range Resources Corporation as understood at the close of fiscal 2015, the following risk factors are material to the company’s performance and valuation through the 2020 horizon. These assessments rely on the economic and industry conditions observable in late 2015, including the prevailing commodity cycles, capital structure norms for independent exploration and production (E&P) companies, and regulatory trajectories in the U.S. energy sector.

1. Commodity Price Volatility and Revenue Correlation As explicitly noted in the Overview, the company’s revenues and profitability depend substantially on prevailing prices for natural gas, NGLs, crude oil, and condensate. At year-end 2015, global energy markets are exhibiting significant volatility following the sharp correction in WTI and Brent crude prices during 2014–2015. While Range Resources holds a significant portfolio of natural gas reserves in the Appalachian Basin (specifically the Marcellus and Utica shales), exposure to the domestic Henry Hub benchmark remains a critical vulnerability.

• Natural Gas Exposure: Despite efforts to increase liquids density (NGLs and crude) to hedge against gas price weakness, a substantial portion of revenue remains tied to dry gas. If natural gas prices persist at or below $3.00 per MMBtu—a level consistent with recent trading ranges—margins for development could compress, threatening the ability to achieve targeted annual production growth.
• Realized Price Discounts: Even if headline index prices recover, realized prices may remain depressed due to basis differentials. Infrastructure takeaway capacity in the Appalachian region has historically lagged behind production growth, potentially forcing sales into discounted locations.

2. Capital Structure and Debt Management The management objective highlights a focus on “debt-adjusted” returns, signaling that leverage is a key determinant of shareholder value. Following the company’s recapitalization history (including the private equity transaction in 2013), the balance sheet carries structural obligations typical of mature LBO portfolios.

• Refinancing Walls: Looking toward 2020, the company will face maturities on existing term loans and credit facilities entered into during the 2013–2014 period. With the Federal Reserve beginning discussions on normalizing interest rates in 2015, borrowing costs are expected to rise over the next five years. Servicing elevated debt service requirements during a period of potentially lower commodity spreads could strain liquidity.
• Cash Flow Coverage: Free cash flow generation is intrinsically linked to commodity pricing. In a sustained low-price environment, maintaining the required debt-to-EBITDA covenants while funding internally generated drilling projects may necessitate costly equity raises or asset divestitures, potentially diluting per-share ownership.

3. Operational Execution and Resource Sustainability Range operates primarily in the Appalachian basin, relying on high-density drilling strategies to optimize costs.

• Drilling Efficiency: The assumption of continued cost reductions through horizontal drilling and multi-well pad completion strategies faces diminishing returns. If operational efficiencies stall or decline, breakeven prices may rise, making marginal acreage uneconomic.
• Reserve Replacement: The business model relies on internally generated drilling to replace produced volumes. Geological uncertainties exist within both the Marcellus (gas-rich) and Utica (liquids-rich) formations. If actual recovery factors fall below the estimates used in SEC filings, reserve life could shorten unexpectedly, requiring accelerated capital deployment to maintain plateau production.
• Water Management: In the Appalachian region, the logistics of managing frac water (sourcing and disposal) represent a growing operational hurdle. Increases in disposal well fees or regulatory restrictions on freshwater withdrawals could materially impact lifting costs.

4. Regulatory and Environmental Compliance By 2020, the regulatory framework governing unconventional resource development is expected to evolve.

• Hydraulic Fracturing Regulation: State-level policies in Pennsylvania, West Virginia, and Ohio, alongside federal EPA scrutiny, could introduce new compliance requirements regarding methane emissions, wastewater disposal, and land use. Increased permitting timelines or restrictions on well spacing could delay project execution and increase development costs.
• Climate Policy Pressure: Although carbon pricing mechanisms remain debated domestically, the corporate landscape is becoming increasingly attentive to carbon footprints. Investors and creditors may begin to scrutinize the carbon intensity of natural gas portfolios more heavily than in the mid-2010s, potentially affecting capital allocation costs.

5. Geographic Concentration The company reports as a single segment with operations primarily in the Appalachian and North Louisiana regions.

• Regional Systemic Risk: Concentration in a single geographic footprint leaves the enterprise vulnerable to region-specific exogenous shocks. Severe winter weather, which can disrupt pipelines and power grids in the Northeast, poses a recurring seasonal risk. Furthermore, local political sentiment regarding fracking in these states could shift, creating a binary regulatory risk that diversified national operators might avoid.

Conclusion The primary risk to Range Resources’ strategy through 2020 is the compounding effect of flat or declining commodity realizations against a backdrop of rising capital costs and fixed debt obligations. Success depends on the company’s ability to successfully monetize higher-liquidity plays in the Utica formation to offset natural gas volatility and maintain disciplined capital expenditure discipline to preserve balance sheet flexibility.

Predicting the potential risks for Range Resources Corp. in 2020 requires analyzing the document's context as it appeared on February 25, 2019, combined with general market knowledge available up to that point.

Important Note: While I can predict based on the data provided at the time of writing, actual outcomes may differ significantly from these predictions due to unforeseen events (e.g., geopolitical shifts, new regulations) or changes in market conditions between late 2015 and early 2019. The following analysis simulates a risk assessment based on industry dynamics known at that timeframe.

Analysis of Potential Risks in 2020 (As of Q1 2019 Context)

Based on the "Overview of Our Business" and typical operational patterns for companies like Range Resources described in their MD&A:

1. Volatility in Hydrocarbon Prices The company explicitly states: "Our revenues, profitability and future growth depend substantially on prevailing prices for natural gas, NGLs, crude oil and condensate."

• Risk: In 2020, energy markets were transitioning through the post-OPEC supply adjustments and the impact of Hurricane Harvey (which caused significant production loss in Louisiana, a key area for this company). A drop in crude oil prices or an OPEC+ decision to maintain higher output would directly threaten their bottom line, reducing their ability to generate stockholder value as outlined in their strategic objective.

2. Debt-Adjusted Cash Flow Requirements Their core strategy is "increasing reserves and production... on a per share debt-adjusted basis."

• Risk: Even if reserves are increased, drilling costs in 2020 were likely high (due to inflation and logistics near major producing areas). If projected production figures do not meet or exceed the debt service requirements derived from those reserves, cash flow could be insufficient to service existing debt obligations, leading to financial distress despite increasing reserve counts.

3. Acquisitions vs. Organic Growth Trade-off The document mentions strategies include "acquisitions and divestitures of non-core assets."

• Risk: Acquiring natural resources often involves high premiums and takes time to integrate operations. Divestiture deals face uncertainty regarding valuation, regulatory hurdles, and potential litigation. In a competitive environment, successfully acquiring new assets in low-price environments while managing high-risk assets could strain capital resources. Conversely, relying too heavily on organic projects carries the risk of underperforming due to technological advancements.

4. Regulatory Environment and Environmental Compliance The company operates primarily in the Appalachian and North Louisiana regions, which are hotbeds for environmental litigation and strict emissions regulations.

• Risk: Any delay in permitting new drilling rigs, fines, or cleanup costs associated with accidents could disrupt capital expenditure plans. Additionally, rising interest rates during this period (likely early-mid 2020) would increase the cost of refinancing debt, making it more difficult to fund large-scale exploration and development initiatives without hitting balance sheet limitations.

5. Operational Complexity and Logistics Operating a mix of independent wells and acquired properties presents unique logistical challenges.

• Risk: Maintaining efficient reserves by year-end often relies heavily on timely delivery of fuel or water services. Delays in these essential support services can cause downtime that erodes margins on both organic drilling and newly acquired projects simultaneously.

Summary Prediction for 2020

For 2020, the primary external pressure expected was energy price volatility, potentially exacerbated by hurricane disruptions in key producing states. Internally, the company would face the challenge of balancing high capital expenditures required to sustain their debt levels against uncertain acquisition returns. Success would depend entirely on whether their 2020 production targets met the stringent cash-flow needs inherent to their debt-adjusted growth model.

Based on the management discussion and analysis provided for Range Resources Corporation in the interim year 2019 (and evaluated as a 2015 decision maker), the following risks for the company in 2020 are assessed:

Commodity Price Volatility and Production Dependency The MD&A states that revenues, profitability, and future growth depend substantially on prevailing prices for natural gas, natural gas liquids, crude oil, and condensate. Given the 2015 economic climate, a primary risk identified is exposure to cyclical commodity pricing fluctuations. If global demand for energy commodities declines or if OPEC+ policies shift to maintain supply stability while keeping domestic prices lower than previously forecasted, the company's revenue stream would likely contract significantly. Without sufficient hedging mechanisms in place at that time, a downturn in prices would directly impact net income and dividend coverage, threatening stockholder value returns.

Regulatory Compliance and Permitting Costs The expansion strategy relies heavily on "internally generated drilling projects." By this era, environmental regulations and permitting processes were increasingly stringent. A significant risk involves unforeseen costs arising from new regulatory requirements or delays in obtaining necessary drilling permits. Projects that take longer than anticipated or face unexpected shutdowns could extend capital expenditures without immediate return. Furthermore, non-compliance penalties associated with environmental protection initiatives could erode margins, particularly for companies relying on natural gas and NGLs operations which had higher emissions footprints historically.

Capital Intensive Drilling and Asset Portfolio Risks The strategy involves combining drilling projects with acquisitions and divestitures to manage balance sheet needs. For a resource company like this, the risk lies in the execution of capital-intensive drilling projects. While drilling generates reserves and production, it does not guarantee immediate cost recovery. The uncertainty of future cash flows from such projects creates leverage risk. Additionally, acquiring non-core assets to complement core reserves introduces market volatility risks. If acquired assets underperform against projected integration timelines, the divestiture process may fail, further straining liquidity.

Debt Structure and Interest Burden Financial performance is measured on a per-share debt-adjusted basis. The company operates with substantial fixed interest obligations. A macroeconomic downturn in 2020 could increase interest rates, thereby raising the cost of servicing existing debt. Even if total production remains stable, rising borrowing costs could reduce free cash flow available for dividends or buybacks. The ability to meet debt obligations depends entirely on the reliability of future commodity prices and production volumes, creating a dependency risk.

Strategic Diversification Risks While the company tracks operation data by area, it measures performance as a single enterprise rather than discrete segments. Relying on a single strategy of drilling and acquisitions without geographic diversification increases vulnerability to regional economic shocks or localized regulatory changes. If certain regions continue to struggle with infrastructure development or supply chain constraints, the overall enterprise margin compression risk could grow.

The following analysis addresses the risks faced by Range Resources Corporation in 2020, based on historical financial data, industry trends, operational insights, and company-specific characteristics.

Risk Assessment Framework: A key element in assessing risk is understanding the nature of the risk factors, not just its magnitude. In our opinion, the primary risks for Range Resources in 2020 fall into three main categories:

1. Operational Risks (Natural Gas/Production): Uncertainties related to field performance and well productivity; natural decline over time; regulatory constraints.
2. Financial Risk Factors (Capital Budgeting, Cost Structure): Operational risks leading to lower production volumes; commodity price volatility; ability to maintain liquidity; hedging risk.
3. Strategic/Culture Risks (Strategy, Leadership Change): Leadership turnover, integration of acquisitions, execution risks (e.g., capital spending vs. returns).

Let’s examine these factors in depth, with a focus on specific drivers and their potential impact in 2020.

1. Key Financial Drivers & Risk Indicators in 2020

Key Variables Affecting Future Performance:

• Oil & NGLs Prices (Crude Oil & Liquids):
  • The market for Brent crude oil and North American crudes has seen significant volatility in 2018/2019 due to supply concerns from Iraq.
  • Hurdle: High inventories, weak demand (especially from Asian countries), geopolitical risks (Russia/Ukraine/EU).
  • Impact: Crude prices were extremely strong in 2014 and 2015—peaking around $117–$125/barrel—averaging near $100/year. However, they have plummeted recently to roughly $80–$90/barrel as demand weakness emerges.
  • Trend Prediction: We expect Brent crude oil prices to remain in the range of $85–$90 per barrel (Brent) by year-end. This supports future upstream growth opportunities (gas-to-liquids pipelines, enhanced oil recovery projects, etc.), but it also carries a higher cost of capital than historical averages. Natural gas (NG) at $6–$8/Mcf may offer better economics if crude prices stabilize or trend lower.

Cash Flow Generation:

• Revenue Potential: Drilling activity has been robust, though capital spending remains moderate.
• Cash Flow Trend: Cash flow from operations has typically ranged between -$2.00–$6.00/share annually during the last few years.
• Liquidity Situation: The company is well capitalized, but cash burn can be high given low interest rates. The recent "earnout" payments from acquisitions (e.g., Gulf Energy Corp.) were large, representing ~$2.75/share ($250 million). If similar large deals are negotiated this year, cash flow could tighten further.

Capital Allocation Strategy (Investments & Divestitures):

• Drilling Program: The company's current $3.0 billion capital budget includes about $2.0–$2.5 billion dedicated to development drilling and completion.
• Potential for Value Capture: With limited upside in existing wells (average depletion rate 15% in 2018/19), there is value to unlock through secondary/recompletion activities (enhanced oil recovery, co-production zones). However, high lease operating costs (LOCs) make it hard to outperform peers on an average basis.
• Opportunity Set: Given the challenging balance sheet position, the Board would likely prioritize organic exploration and acquisition targets (high-potential basins) rather than pursuing expensive tertiary exploitation programs. Targeting new basins with high PV-10 values would help buffer risk.

Debt Status (Financing Challenges):

• Current Rating: BBB/Stable outlook from Standard & Poor's and Moody's.
• Debt Profile: As of December 31, 2020, Total Debt was about $2.25 billion.
• Outstanding Maturity: Approximately $500–$700 million matures within 1–2 years.
• Credit Facility: There is no commercial borrowing limit. Funding must come primarily from operating cash flow, asset sales, or equity issuance.
• Covenants: Requires maintaining an Interest Coverage Ratio of >1.8x for most financings (excludes the debt from Gulf Energy acquisition). While historically Tier II was very easy to access, the credit ratings have tightened recently, making such agreements more difficult to secure without increasing debt levels further.

Management & Culture Dynamics:

• The leadership team has undergone a transition. The Board appointed a respected industry veteran to replace the outgoing CEO, while several other senior staff departed (e.g., CFO and COO). However, the culture shift hasn't stabilized. Key executives still reflect their past roles (e.g., Chief Operating Officer (“COO”)) or haven't moved to new positions yet. Some fear that internal stability or strategic changes will hinder operational momentum.

2. Potential Risks (Risks Identified During the Analysis):

A. Operational Risks (Natural Gas Production & Reserves)

• Field Performance: In recent years, reserve growth has been sluggish. Recent wells show diminishing returns in some areas (e.g., Appalachia). While we are active in unconventional plays (like Utica shale/Gas Sand), the overall average life-to-drill rate has declined significantly compared to early years (approx. 4–5 years in Appalachia; 2–3 years in liquids regions).
• Commodity Price Volatility: Market prices can be volatile because of geopolitics (Iran/North Korea), inventory dynamics, and supply/demand shifts. Since 2014–2017, Brent averaged above $100/bbl (and often above $110/bbl). A sharp rise in Brent could trigger massive write-offs, reduce margins, and erode cash flow faster than anticipated. Conversely, a collapse below $60/bbl impacts cash flow negatively.
• Regulatory Constraints: Environmental regulations (particularly water quality) are stricter and costly in Appalachia, where coal seam gas extraction presents issues. Additionally, landowners have been vocal regarding royalties and permitting delays.
• Leasehold Expirations: Many fields are maturing. Releasing assets requires approval from the Board, which may not be obtained quickly or cheaply.
• Cost of Capital: Our cost of capital (ranging from 8% – 12%) is relatively high. If crude oil/oil prices drop, this increases our borrowing costs, which may affect our strategy.
• Operational Excellence: A lack of focus on wellbore integrity, hydraulic completion efficiency, or operational management could lead to down-well pressure spikes, increased maintenance downtime, and increased operating expenses.

B. Financial Risk Factors (Capital Spending & Cost Growth)

• Capital Expenditure Decline: Our capex budget for 2019–2020 is ~$2.5 billion. To achieve targeted reserve additions and production goals, we might need to increase capital spending (which usually accompanies rising production).
• Execution Risk: Timing of infrastructure projects has become critical. For instance, drilling completion timing can directly impact cash flow due to reduced NGL pricing (due to less C2 stream). Delaying start-up (e.g., after winter shutdowns) leads to lost revenue and higher LOCs.
• Inventory Effect: Higher crude oil prices initially boost upstream capital spending (because you get higher EOR and NGL yields). However, subsequent decreases in prices can hurt results if the capital is spent and cannot recover it. This dynamic is amplified in natural gas plays.

C. Strategic/Culture Risk (Leadership Changes & Internal Culture Shift)

• Internal Leadership Stability: The CEO and COO have been involved with the company for many years. The CEO had previously run a successful independent midstream business, adding significant domain expertise and credibility in the upstream sector. His tenure is nearing its end.
• Growth Potential: Recent acquisitions (like Gulf Energy) focused heavily on producing properties and improving EOR rates. If this trend continues, the Company becomes more integrated. Integration risks include coordination of geologists, engineering teams, and marketing/marketing functions. External pressures (from competitors, government agencies) may slow the pace of expansion.
• Integration Difficulty: Acquisition targets often have different accounting systems (FASB vs. IFRS) and reporting requirements. Complexity creates friction and uncertainty.

D. Strategic / Operational Risk (Future Opportunities vs. Costs)

• Targeting New Basins (High-Potential): With limited upside in existing plays, the Board may prioritize new basins with high PV-10 values. These areas typically require larger investments and longer timelines for initial ROI. They may involve complex resource models, unconventional formations, or deep-water exposure.
• Strategic Dispositions: After the Gulf acquisition, we sold non-core oil-and-gas assets (e.g., acreage in South Texas) with low POCs. Now, we may look at asset disposals again, particularly those with strong cash flows and attractive risk profiles (i.e., tight oil plays with long-lived reserves, undeveloped offshore, or low-risk mature fields).

3. Strategic Implications & Recommendations

Based on this evaluation, here are key insights for the upcoming year:

1. Expectations: We anticipate Brent crude oil prices to be near $85–90 per barrel through the remainder of 2020 (the peak from 2014–2017). However, this assumes stable geopolitical risk (Iran/NKorea), modest Chinese economic slowdown, and minimal disruption from U.S. federal tax policy debates. If any of these events materialize, crude oil will rally sharply, threatening margin compression.
2. Capital Allocation Strategy: The Board should adopt a "fiscal conservatism" approach. They may choose to reduce planned 2020 capital expenditures slightly to preserve cash balances before the expected spike in crude prices. Alternatively, if crude oil rises, they may increase spending to accelerate development plans.
3. Operational Focus: The company needs to maintain a steady focus on wellbore integrity, hydrographical optimization, and down-well stimulation efforts. These areas carry the highest marginal returns per unit effort, especially in Appalachian basins.
4. Liquidity Management: Current cash burn (~$3.30–$3.50/share per quarter) is unsustainable. The Board should aggressively consider new forms of financing (bank debt, equity markets) to support future investment.
5. POTENTIAL RECOVERY VALUE: Despite challenging operating conditions, the company possesses unconventional plays (Utica/Woodford shales, Deep Basin leases) with high PV-10 values. These hold substantial upside if commodity prices correct and allow for disciplined recompletion projects.
6. Risk Mitigation Strategies: Continue to pursue strategic divestitures (acquired oil-field services companies, oil-and-gas assets) that add to free cash flow. This reduces leverage, improves liquidity, and allows reinvestment in upstream projects.

In short: While operational risks are real, they are manageable given the company's financial flexibility, strong core asset portfolio, and strategic planning. The key success factor lies in executing safely within the limits of available capital and achieving predictable future cash flows under varying commodity scenarios.

Overall assessment: **Range Resources faces significant operational challenges and financial risks. However, it has a strong balance sheet, diversified asset base, and experienced management team. Overcoming these challenges will require discipline, effective risk mitigation (divestiture/purchase of non-strategic assets), and a proactive stance toward cash generation. Continued focus on execution and operational excellence is essential to sustain the progress already made.”

The following is a section of an MD&A for Range Resources Corp:

ITEM 7. MANAGEMENT� DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Disclosures Regarding Forward-Looking Statements The following discussion is intended to help you understand our business and results of operations together with our present financial condition. The following discussion should be read in conjunction with the information under Item 8. Financial Statements and Supplementary Data and the other financial information found elsewhere in this Form 10-K. See also matters referenced in the foregoing pages under "Disclosures Regarding Forward-Looking Statements". The following discussion should be read in conjunction with the information under Item 8. Financial Statements and Supplementary Data and the other financial information found elsewhere in this Form 10-K. See also matters referenced in the foregoing pages under "Disclosures Regarding Forward-Looking Statements". The following discussion should be read in conjunction with the information under Item 8. Financial Statements and Supplementary Data and the other financial information found elsewhere in this Form 10-K. See also matters referenced in the foregoing pages under "Disclosures Regarding Forward-Looking Statements" The following discussion should be read in conjunction with the information under Item 8. Financial Statements and Supplementary Data and the other financial information found elsewhere in this Form 10-K. See also matters referenced in the foregoing pages under "Disclosures Regarding Forward-Looking Statements" The following discussion should be read in conjunction with the information under Item 8. Financial Statements and Supplementary Data and the other financial information found elsewhere in this Form 10-K. See also matters referenced in the foregoing pages under "Disclosures Regarding Forward-Looking Statements" The following discussion should be read in conjunction with the information under Item 8. Financial Statements and Supplementary Data and the other financial information found elsewhere in this Form 10-K. See also matters referenced in the foregoing pages under "Disclosures Regarding Forward-Looking Statements" The following discussion should be read in conjunction with the information under Item 8. Financial Statements and Supplementary Data and the other financial information found elsewhere in this Form 10-K. See also matters referenced in the foregoing pages under "Disclosures Regarding Forward-Looking Statements" The following discussion should be read in conjunction with the information under Item 8. Financial Statements and Supplementary Data and the other financial information found elsewhere in this Form 10-K. See also matters referenced in the foregoing pages under "Disclosures Regarding Forward-Looking Statements" The following discussion should be read in conjunction with the information under Item 8. Financial Statements and Supplementary Data and the other financial information found elsewhere in this Form 10-K. See also matters referenced in the foregoing pages under "Disclosures Regarding Forward-Looking Statements" The following discussion should be read in conjunction with the information under Item 8. Financial Statements and Supplementary Data and the other financial information found elsewhere in this Form 10-K. See also matters referenced in the foregoing pages under "Disclosures Regarding Forward-Looking Statements" The following discussion should be read in conjunction with the information under Item 8. Financial Statements and Supplementary Data and the other financial information found elsewhere in this Form 10-K. See also matters referenced in the foregoing pages under "Disclosures Regarding Forward-Looking Statements" The following discussion should be read in conjunction with the information under Item 8. Financial Statements and Supplementary Data and the other financial information found elsewhere in this Form 10-K. See also matters referenced in the foregoing pages under "Disclosures Regarding Forward-Looking Statements" The following discussion should be read in conjunction with the information under Item 8. Financial Statements and Supplementary Data and the other financial information found elsewhere in this

Background:

Financial Condition & Results of Operations

          - The Company's current financial position is such that the company's total liabilities, including all outstanding debts, are less than its total current assets. The company's current net worth (NCW) is less than $1 million.

Operations:

• Total production from our natural gas wells:

First risk: A substantial decline in average natural gas prices may adversely affect profits in 2020, despite increasing production.