Financial Condition and Performance - The company reported a net loss of $617,278 thousand for the period from February 14, 2024, to December 31, 2024, compared to a net loss of $93,673 thousand for the year ended December 31, 2023[340]. - The accumulated deficit as of December 31, 2024, stands at $698,296 thousand, reflecting ongoing financial challenges[342]. - The company has cash and cash equivalents of $300,384 thousand as of December 31, 2024, indicating a strong liquidity position[338]. - The company’s total stockholders' equity as of December 31, 2024, is $384,185 thousand, up from $339,021 thousand in the previous year[338]. - The company reported a net loss of $617,278 for the year ended December 31, 2024, compared to a net loss of $11,789 for the previous period[345]. - Net cash used in operating activities was $162,968, significantly higher than $22,474 in the prior period[345]. - The company has experienced negative cash flows from operations since inception, raising concerns about its ability to continue as a going concern[360]. - The company is facing uncertainties regarding regulatory approvals necessary to restart production, raising doubts about its ability to continue as a going concern[331]. Production and Operational Challenges - The company estimates total remaining start-up expenses of approximately $152.0 million to restart production, primarily for regulatory approvals and pipeline repairs, expected to be completed by Q2 2025[142]. - The company may be unable to restart production by March 1, 2026, which would allow the prior owner to reclaim the SYU Assets without compensation, impacting financial stability[141]. - The company must restart production of the SYU Assets by March 1, 2026, or risk losing ownership to EM without compensation[170]. - The company faces risks related to permitting obligations and regulatory requirements that must be satisfied before restarting production[140]. - The company expects to continue incurring losses until it can restart production of the SYU Assets, contingent upon regulatory approvals[359]. - The company has not generated any oil and gas revenue to date as it is working to restart production associated with its oil and gas properties[372]. Market and Commodity Price Risks - Oil, natural gas, and NGL prices are volatile and significantly affect the company's cash flow and financial condition, with historical fluctuations noted[144][145]. - For the five years ended December 31, 2024, NYMEX-WTI oil futures prices ranged from a high of $123.70 per Bbl to a low of $(37.63) per Bbl, indicating significant market volatility[147]. - An extended decline in commodity prices could render the company's business uneconomical, leading to potential write-downs of asset values[148]. - The differential between NYMEX benchmark prices and the wellhead prices expected for future production could significantly reduce cash flow[149]. - Management expects significant volatility in oil and gas prices and industry margins, impacting future earnings[392]. Regulatory and Environmental Risks - The company is subject to stringent environmental regulations that could increase operational costs and affect profitability[181]. - New environmental laws may impose stricter requirements, potentially impacting the company's ability to conduct drilling and production activities[184]. - The California state government has enacted measures to reduce fossil fuel supply and demand, potentially limiting oil and gas production[195]. - The U.S. Court of Appeals has prohibited new permits for hydraulic fracturing in federal waters off California until a full environmental review is completed, which could delay operations[198]. - The State Lands Commission has authorized a temporary moratorium on new offshore oil and gas pipeline lease applications until an analysis of public trust resources is completed by December 31, 2026[200]. - The listing of species as "threatened" or "endangered" could lead to increased costs and operational restrictions, adversely affecting financial results[186]. - Climate change measures and technological advances may reduce demand for oil, natural gas, and NGLs, impacting business and financial condition[187]. - The Inflation Reduction Act imposes a waste emissions charge on facilities exceeding a specified emissions threshold, creating uncertainty in future implementation[190]. - The Inflation Reduction Act of 2022 imposes a methane emissions charge starting at $900 per ton in 2024, increasing to $1,200 in 2025 and $1,500 in 2026, which could significantly increase operational costs for the company[211]. Financial Obligations and Capital Structure - The Senior Secured Term Loan Agreement imposes restrictive covenants that limit the company's ability to engage in mergers, incur debt, or pay dividends[171]. - A springing maturity date of 90 days after restarting production could necessitate refinancing under potentially unfavorable market conditions[174]. - Future refinancing may expose the company to interest rate risk, increasing debt service obligations if variable rates are incurred[175]. - The company may need to raise additional capital through equity or debt issuance, which could dilute existing shareholders and impose operational restrictions[176]. - The company may seek to obtain financing by issuing additional shares or debt securities, which could dilute existing stockholders' ownership and reduce the market price of its Common Stock[230]. - The company is required to maintain reserve funds for decommissioning costs, which are subject to change and could materially affect financial condition if actual costs exceed estimates[212]. Internal Control and Governance - The company has identified material weaknesses in internal control over financial reporting, which could adversely affect investor confidence and financial reporting accuracy[139]. - The company is required to maintain effective disclosure controls and internal control over financial reporting to comply with the Sarbanes-Oxley Act, which may incur significant costs and challenges[225]. - There is a risk that the company may not conclude that its internal control over financial reporting is effective, which could lead to material weaknesses being identified[225]. - The company is classified as an "emerging growth company," which allows it to take advantage of reduced reporting requirements, potentially making its stock less attractive to investors[241]. Shareholder and Market Risks - The trading price of the company's Common Stock is likely to be volatile, influenced by various external factors beyond operational performance[218]. - Future sales of the company's Common Stock by existing stockholders could negatively impact the market price of the stock, potentially leading to reduced liquidity and increased volatility[227]. - The trading market for the company's Common Stock may decline if analysts do not publish favorable reports or cease coverage altogether[236]. - Unfavorable ESG ratings may lead to negative investor sentiment and a diversion of investment, adversely affecting stock price and access to capital[206]. - Increased scrutiny from government agencies on "de-SPAC" transactions may adversely affect the stock price due to heightened regulatory focus[222]. Acquisition and Asset Management - The company completed a merger and acquired the SYU Assets effective January 1, 2022, as part of its business combination strategy[350]. - The company completed an acquisition with a total adjusted purchase consideration of $985.6 million, which includes a $625 million Senior Secured Term Loan and $203.9 million in cash paid to Exxon[414][415]. - The fair value of oil and gas properties acquired in the transaction was estimated at $1.06 billion, with asset retirement obligations of $90.1 million assumed[416]. - The Company had net capitalized costs related to oil and gas properties and related equipment of $1.2 billion as of December 31, 2024, and $689.0 million as of December 31, 2023[389]. - The Company assesses oil and gas properties for impairment on an ongoing basis, considering various indicators such as significant decreases in market prices or adverse changes in usage[390].
Flame Acquisition (FLME) - 2024 Q4 - Annual Report