Talos Energy(TALO) - 2022 Q3 - Quarterly Report

GLOSSARY This section provides definitions for key terms used throughout the report CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS This statement warns readers about the inherent risks and uncertainties associated with forward-looking statements in the report - The report contains forward-looking statements regarding business strategy, reserves, exploration and development, financial strategy, realized prices, the proposed EnVen acquisition, future production, hedging, drilling plans, and various market and regulatory conditions[20][21][26] - These forward-looking statements are subject to numerous risks and uncertainties, including commodity price volatility (due to COVID-19, OPEC+ actions, Ukraine war), lack of transportation/storage, equipment availability, adverse weather, cybersecurity, inflation, environmental risks, and geological risks[23] - Reserve estimates are inherently uncertain, depending on data quality, interpretation, and price/cost assumptions, and may differ significantly from ultimately recovered quantities[24] PART I — FINANCIAL INFORMATION This part presents the company's unaudited condensed consolidated financial statements and related disclosures Item 1. Condensed Consolidated Financial Statements This section presents the unaudited condensed consolidated financial statements of Talos Energy Inc. for the period ended September 30, 2022, including balance sheets, statements of operations, changes in stockholders' equity, and cash flows, along with detailed notes explaining the company's organization, accounting policies, and significant financial activities Condensed Consolidated Balance Sheets This section provides a snapshot of the company's assets, liabilities, and equity at specific points in time Condensed Consolidated Balance Sheets: | Metric | Sep 30, 2022 (in thousands) | Dec 31, 2021 (in thousands) | | :----------------------------------- | :-------------------------- | :-------------------------- | | Total current assets | $371,978 | $340,003 | | Total property and equipment, net | $2,380,230 | $2,388,582 | | Total assets | $2,813,366 | $2,766,815 | | Total current liabilities | $556,328 | $600,526 | | Total liabilities | $1,658,023 | $2,006,162 | | Total stockholders' equity | $1,155,343 | $760,653 | - Total assets increased by $46.55 million, and total stockholders' equity significantly increased by $394.69 million from December 31, 2021, to September 30, 2022[29] Condensed Consolidated Statements of Operations This section details the company's revenues, expenses, and net income or loss over specific periods Condensed Consolidated Statements of Operations: | Metric (in thousands) | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Total revenues | $377,128 | $290,909 | $1,309,779 | $861,585 | | Total operating expenses | $213,140 | $198,570 | $652,284 | $611,275 | | Operating income | $163,988 | $92,339 | $657,495 | $250,310 | | Net income (loss) | $250,465 | $(16,691) | $379,165 | $(263,964) | | Basic EPS | $3.03 | $(0.20) | $4.60 | $(3.23) | | Diluted EPS | $2.99 | $(0.20) | $4.54 | $(3.23) | - The company reported a significant turnaround from a net loss in 2021 to substantial net income in 2022 for both the three and nine-month periods, driven by increased revenues and operating income[31] Condensed Consolidated Statements of Changes in Stockholders' Equity This section outlines the changes in the company's equity accounts over specific periods Condensed Consolidated Statements of Changes in Stockholders' Equity: | Metric (in thousands) | Balance at Dec 31, 2021 | Balance at Sep 30, 2022 | | :-------------------- | :---------------------- | :---------------------- | | Common Stock Par Value | $819 | $826 | | Additional Paid-In Capital | $1,676,798 | $1,692,316 | | Accumulated Deficit | $(916,964) | $(537,799) | | Total Stockholders' Equity | $760,653 | $1,155,343 | - Total stockholders' equity increased by $394.69 million from December 31, 2021, to September 30, 2022, primarily due to net income of $379.17 million and equity-based compensation[34] Condensed Consolidated Statements of Cash Flows This section reports the cash generated and used by operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows: | Metric (in thousands) | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :-------------------- | :-------------------------- | :-------------------------- | | Net cash provided by operating activities | $538,928 | $287,648 | | Net cash used in investing activities | $(198,652) | $(212,153) | | Net cash used in financing activities | $(345,638) | $(50,301) | | Net increase (decrease) in cash and cash equivalents | $(5,362) | $25,194 | | Cash and cash equivalents, end of period | $64,490 | $59,427 | - Net cash provided by operating activities significantly increased by $251.28 million year-over-year, while net cash used in financing activities also increased substantially due to debt repayments[36] Note 1 — Organization, Nature of Business and Basis of Presentation Talos Energy Inc. is an independent exploration and production company focused on upstream oil and gas in the U.S. and offshore Mexico, and developing carbon capture and sequestration (CCS) opportunities. The company operates through two segments: Upstream (reportable) and CCS (non-reportable, unrestricted subsidiary) - Talos Energy Inc. operates in two segments: Upstream (oil, natural gas, NGLs exploration and production) and CCS (carbon capture and sequestration) The Upstream Segment is the only reportable segment[39][43] CCS Segment Asset and Income Information (in thousands): | Metric | September 30, 2022 | | :----- | :----------------- | | Total assets | $20,087 | | Metric | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2022 | | :----- | :-------------------------- | :-------------------------- | | Net income | $620 | $6,493 | Note 2 — Property, Plant and Equipment This note details the company's property, plant, and equipment, including proved and unproved properties, and asset retirement obligations. It confirms no write-downs resulted from ceiling test computations for the period - No write-down of U.S. oil and natural gas properties resulted from ceiling test computations for the three and nine months ended September 30, 2022 and 2021[46] Asset Retirement Obligations (in thousands): | Metric | Amount (Sep 30, 2022) | | :---------------------------------- | :-------------------- | | Asset retirement obligations at Dec 31, 2021 | $434,006 | | Obligations incurred | $78 | | Obligations settled | $(60,304) | | Obligations divested | $(1,572) | | Accretion expense | $42,400 | | Changes in estimate | $38,656 | | Asset retirement obligations at Sep 30, 2022 | $453,264 | | Less: Current portion at Sep 30, 2022 | $65,613 | | Long-term portion at Sep 30, 2022 | $387,651 | Note 3 — Leases The company holds operating leases for office space, drilling rigs, and equipment, and a finance lease for the Helix Producer I facility. Lease costs include finance, operating, short-term, and variable components, with short-term drilling rig contracts being a significant portion Total Lease Costs (in thousands): | Metric | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :---------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Finance lease cost - interest | $1,386 | $2,749 | $5,179 | $9,017 | | Operating lease cost (excl. short-term) | $568 | $702 | $1,703 | $2,138 | | Short-term lease cost | $12,982 | $14,541 | $24,838 | $32,393 | | Variable lease cost | $363 | $350 | $1,088 | $994 | | Total lease cost | $15,299 | $18,342 | $32,808 | $44,542 | - Short-term lease costs, primarily for drilling rigs, represent the largest component of total lease costs, decreasing from $14.54 million to $12.98 million for the three months ended September 30, 2022[50][51] Note 4 — Financial Instruments This note details the company's financial instruments, including debt and oil/natural gas derivatives used to mitigate commodity price risk. It provides fair value measurements and the impact of derivatives on the statements of operations, highlighting a shift from a net derivative liability of $196.73 million at year-end 2021 to $59.38 million at September 30, 2022 Debt Instruments Carrying Amounts and Fair Values (in thousands): | Debt Instrument | Sep 30, 2022 Carrying Amount | Sep 30, 2022 Fair Value | Dec 31, 2021 Carrying Amount | Dec 31, 2021 Fair Value | | :------------------------------------------ | :--------------------------- | :---------------------- | :--------------------------- | :---------------------- | | 12.00% Second-Priority Senior Secured Notes | $597,570 | $678,438 | $588,838 | $685,945 | | 7.50% Senior Notes | $0 | $0 | $6,060 | $6,145 | | Bank Credit Facility | $54,538 | $60,000 | $367,829 | $375,000 | Impact of Derivatives on Statements of Operations (in thousands): | Metric | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :---------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net cash paid on settled derivatives | $(81,162) | $(71,634) | $(368,483) | $(189,252) | | Unrealized gain (loss) | $195,342 | $(9,845) | $137,350 | $(216,352) | | Price risk management activities income (expense) | $114,180 | $(81,479) | $(231,133) | $(405,604) | Net Fair Value of Oil and Natural Gas Derivatives (in thousands): | Metric | September 30, 2022 | December 31, 2021 | | :-------------------- | :----------------- | :---------------- | | Total net liability | $(59,377) | $(196,727) | Note 5 — Debt This note provides a summary of the company's debt instruments, including the 12.00% Second-Priority Senior Secured Notes and the Bank Credit Facility. It highlights the redemption of the 7.50% Senior Notes and an increase in the Bank Credit Facility's borrowing base to $1.1 billion Summary of Debt (in thousands): | Debt Instrument | Sep 30, 2022 | Dec 31, 2021 | | :------------------------------------------ | :----------- | :----------- | | 12.00% Second-Priority Senior Secured Notes | $650,000 | $650,000 | | 7.50% Senior Notes | $0 | $6,060 | | Bank Credit Facility | $60,000 | $375,000 | | Total debt, before discount and deferred financing cost | $710,000 | $1,031,060 | | Total debt, net of discount and deferred financing costs | $652,108 | $962,727 | - The 7.50% Senior Notes matured and were redeemed on May 31, 2022, for $6.1 million[64] - The Bank Credit Facility's borrowing base increased from $950.0 million to $1.1 billion, and commitments increased from $791.3 million to $806.3 million on May 4, 2022[65] Note 6 — Employee Benefits Plans and Share-Based Compensation This note outlines the company's long-term incentive plans, including Restricted Stock Units (RSUs) and Performance Share Units (PSUs), and the associated share-based compensation costs. It details RSU and PSU activity and a modification event in March 2022 involving the cancellation of PSUs and grant of Retention RSUs RSU Activity (9 Months Ended Sep 30, 2022): | Metric | RSUs | | :-------------------------- | :--------- | | Unvested RSUs at Dec 31, 2021 | 1,983,199 | | Granted | 2,297,465 | | Vested | (967,269) | | Forfeited | (63,599) | | Unvested RSUs at Sep 30, 2022 | 3,249,796 | PSU Activity (9 Months Ended Sep 30, 2022): | Metric | PSUs | | :-------------------------- | :--------- | | Unvested PSUs at Dec 31, 2021 | 1,015,459 | | Granted | 629,666 | | Forfeited | (16,486) | | Cancelled | (975,564) | | Unvested PSUs at Sep 30, 2022 | 653,075 | Share-Based Compensation Costs (in thousands): | Metric | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :---------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Total share-based compensation expense | $4,310 | $2,613 | $11,677 | $8,294 | Note 7 — Income Taxes This note discusses the company's income tax expense/benefit and effective tax rates, which are significantly impacted by a full valuation allowance on deferred tax assets. The effective tax rate for the three and nine months ended September 30, 2022, was 0.0% and 0.6%, respectively, primarily due to this valuation allowance Income Tax Benefit (Expense) and Effective Tax Rate: | Period | Income Tax Benefit (Expense) (in millions) | Effective Tax Rate | | :-------------------------- | :--------------------------------- | :----------------- | | 3 Months Ended Sep 30, 2022 | $(0.1) | 0.0% | | 3 Months Ended Sep 30, 2021 | $0.4 | 2.1% | | 9 Months Ended Sep 30, 2022 | $(2.3) | 0.6% | | 9 Months Ended Sep 30, 2021 | $(0.7) | -0.3% | - The company maintains a full valuation allowance for U.S. federal, state, and foreign net deferred tax assets, which is the primary reason for the low effective tax rates[75][76][79] Note 8 — Income (Loss) Per Share This note provides the computation of basic and diluted income (loss) per common share, including the impact of dilutive securities like RSUs and PSUs Income (Loss) Per Common Share (in thousands, except per share amounts): | Metric | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :---------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net income (loss) | $250,465 | $(16,691) | $379,165 | $(263,964) | | Basic EPS | $3.03 | $(0.20) | $4.60 | $(3.23) | | Diluted EPS | $2.99 | $(0.20) | $4.54 | $(3.23) | | Weighted average common shares outstanding – basic | 82,576 | 81,901 | 82,406 | 81,721 | | Weighted average common shares outstanding – diluted | 83,818 | 81,901 | 83,438 | 81,721 | Note 9 — Related Party Transactions This note details transactions and agreements with related parties, including Apollo Funds and Riverstone Funds, the Whistler Acquisition settlement, registration rights agreements (including one for the pending EnVen Acquisition), and the Amended and Restated Stockholders' Agreement. It also covers legal fees paid to a firm with a related partner and the partial sale of the Bayou Bend CCS LLC interest to Chevron - Riverstone Funds held 14.9% of the Company's common stock as of September 30, 2022[82] - In connection with the EnVen Acquisition, a new registration rights agreement was entered into with Adage Capital Partners, L.P. and Bain Capital, LP, who are expected to hold 5.1% and 15.2% of the company's common stock, respectively, post-acquisition[86] - The company recognized a $1.4 million gain (Q3 2022) and a $15.3 million gain (YTD Q3 2022) on the partial sale of its 25% membership interest in Bayou Bend CCS LLC to Chevron[94][95] Note 10 — Commitments and Contingencies This note outlines the company's performance obligations, including secured performance bonds and letters of credit, and discusses legal proceedings and decommissioning obligations. It also provides details on the pending EnVen Acquisition, including consideration and potential termination fees - As of September 30, 2022, the company had $689.5 million in secured performance bonds and $3.9 million in letters of credit[99] - The company entered into a settlement agreement on March 23, 2022, to receive $27.5 million to resolve previously pending litigation against a third-party supplier[101] - The EnVen Acquisition consideration consists of 43.8 million shares of common stock and $212.5 million in cash, with closing expected by late December 2022 or early January 2023[104] Note 11 — Subsequent Event This note describes a subsequent event where Talos Production Inc. commenced a consent solicitation to amend the indenture governing its 12.00% Second-Priority Senior Secured Notes to permit EnVen's 11.75% Senior Secured Second Lien Notes. The consent was obtained, and a supplemental indenture became effective on October 27, 2022 - On October 21, 2022, Talos Production Inc. initiated a consent solicitation to amend the indenture for its 12.00% Notes, allowing EnVen's 11.75% Senior Secured Second Lien Notes Consent was received from 95.8% of holders, and a second supplemental indenture became effective on October 27, 2022[106] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and operational results, detailing its business, significant developments, factors affecting comparability, known trends, and liquidity. It highlights the EnVen acquisition, drilling program updates, and the impact of the Inflation Reduction Act Our Business This section describes Talos Energy Inc.'s core operations in upstream oil and gas and carbon capture and sequestration - Talos Energy Inc. is an independent exploration and production company focused on upstream oil and gas in the U.S. Gulf of Mexico and offshore Mexico, and developing carbon capture and sequestration (CCS) opportunities[111] - The company leverages deep experience and technical expertise in the U.S. Gulf of Mexico, utilizing state-of-the-art three-dimensional seismic data to optimize drilling programs and evaluate business development opportunities[112][113] Significant Developments This section highlights major corporate events, acquisitions, and operational milestones impacting the company - Talos Energy executed a merger agreement to acquire EnVen Energy Corporation for approximately $1.1 billion in stock and cash, expected to close by late December 2022 or early January 2023 This acquisition is projected to increase production by ~40% (24.0 MBoepd) and gross acreage by 35%[115][116] - The company commenced drilling operations on its Lime Rock prospect and plans to move to the Venice prospect, both with a 60% working interest, expecting first oil within 12-18 months[119] - The Inflation Reduction Act of 2022 (IRA) is expected to benefit the company's upstream and CCS businesses by reinstating Lease Sale 257, mandating future Gulf of Mexico lease sales, and increasing the Section 45Q tax credit for CCS to $85 per metric ton[122][123] Factors Affecting the Comparability of our Financial Condition and Results of Operations This section explains key events and operational factors influencing the period-over-period financial comparisons - Planned downtime for the Helix Producer I (HP-I) dry-dock resulted in an estimated deferred production of 6.2 MBoepd (Q3 2022) and 2.1 MBoepd (YTD Q3 2022)[127] - Planned third-party downtime for Shell Odyssey Pipeline maintenance caused an estimated deferred production of 1.8 MBoepd (Q3 2022) and 0.6 MBoepd (YTD Q3 2022)[128] - Unplanned third-party downtime for the Eugene Island Pipeline System resulted in an estimated deferred production of 1.5 MBoepd (YTD Q3 2022)[129] Known Trends and Uncertainties This section discusses market conditions, regulatory changes, and other factors that could impact future financial performance - Oil and natural gas prices remain volatile, with NYMEX WTI crude oil ranging from $75.99 to $123.64 per Bbl and NYMEX Henry Hub natural gas from $3.73 to $9.85 per MMBtu from January 1 to September 30, 2022[134] - The EIA forecasts Henry Hub spot prices to average $9.03/MMBtu in Q4 2022 and $6.01/MMBtu in 2023, and WTI spot prices to average $91.98/Bbl in Q4 2022 and $90.91/Bbl in 2023, with significant volatility expected[135] - The Inflation Reduction Act imposes a federal methane emissions charge starting at $900 per metric ton in 2024, increasing to $1,500 per metric ton by 2026, which could raise operating costs[124] How We Evaluate Our Operations This section explains the key financial and operational metrics used by management to assess company performance - The company evaluates its operations using metrics such as production volumes, realized prices (including derivatives), lease operating expenses, capital expenditures, and Adjusted EBITDA[152] Results of Operations This section analyzes the company's financial performance, including revenues, expenses, and profitability for the reported periods Total Revenues (in thousands): | Period | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | Change | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | Change | | :----- | :-------------------------- | :-------------------------- | :----- | :-------------------------- | :-------------------------- | :----- | | Oil | $295,585 | $246,208 | $49,377 | $1,078,800 | $743,759 | $335,041 | | Natural gas | $68,360 | $31,723 | $36,637 | $181,747 | $86,088 | $95,659 | | NGL | $13,183 | $12,978 | $205 | $49,232 | $31,738 | $17,494 | | Total revenues | $377,128 | $290,909 | $86,219 | $1,309,779 | $861,585 | $448,194 | Average Sale Price Per Unit: | Product | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | Change | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | Change | | :------ | :-------------------------- | :-------------------------- | :----- | :-------------------------- | :-------------------------- | :----- | | Oil (per Bbl) | $90.73 | $68.22 | $22.51 | $97.89 | $62.89 | $35.00 | | Natural gas (per Mcf) | $9.37 | $4.55 | $4.82 | $7.34 | $3.58 | $3.76 | | NGL (per Bbl) | $32.71 | $30.25 | $2.46 | $35.88 | $23.61 | $12.27 | | Price per Boe | $77.34 | $55.94 | $21.40 | $79.30 | $50.15 | $29.15 | | Price per Boe (incl. realized commodity derivatives) | $60.70 | $42.17 | $18.53 | $56.99 | $39.13 | $17.86 | Key Operating Expenses (in thousands): | Expense | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :---------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Lease operating expense | $81,760 | $70,034 | $229,156 | $208,675 | | Depreciation, depletion and amortization | $92,323 | $88,596 | $295,174 | $290,094 | | General and administrative expense | $25,289 | $20,427 | $70,742 | $58,993 | Supplemental Non-GAAP Measure This section provides reconciliation and explanation of non-GAAP financial measures like Adjusted EBITDA - EBITDA and Adjusted EBITDA are non-GAAP measures used to evaluate operational performance and covenant compliance Adjusted EBITDA includes adjustments for non-cash items like derivative fair value changes and equity-based compensation[173][174] Reconciliation of Net Income (Loss) to Adjusted EBITDA (in thousands): | Metric | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :---------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net income (loss) | $250,465 | $(16,691) | $379,165 | $(263,964) | | EBITDA | $385,353 | $117,599 | $810,526 | $170,994 | | Adjusted EBITDA | $197,560 | $131,427 | $656,550 | $416,096 | Liquidity and Capital Resources This section discusses the company's ability to meet its short-term and long-term financial obligations and fund operations - Primary liquidity sources are cash from operations and borrowings under the Bank Credit Facility As of September 30, 2022, available liquidity (cash + Bank Credit Facility capacity) was $806.8 million[178] Capital Expenditures (excluding acquisitions) for 9 Months Ended Sep 30, 2022 (in thousands): | Category | Amount | | :---------------------------------- | :------- | | U.S. drilling & completions | $120,510 | | Mexico appraisal & exploration | $301 | | Asset management | $80,704 | | Seismic and G&G, land, capitalized G&A and other | $35,667 | | CCS | $2,027 | | Total capital expenditures | $239,209 | | Plugging & abandonment | $60,304 | | Total capital expenditures and plugging & abandonment | $299,513 | - The company's board-approved 2022 capital spending program is $450.0 million to $480.0 million, with approximately $30.0 million allocated to CCS[182] - The Bank Credit Facility's borrowing base increased to $1.1 billion, and commitments to $806.3 million, with the next redetermination scheduled for Q4 2022[187] Critical Accounting Policies and Estimates This section identifies the accounting policies requiring significant judgment and estimation by management - Critical accounting policies include those related to oil and natural gas properties, proved reserve estimates, fair value measurement of financial instruments, asset retirement obligations, revenue recognition, imbalances and production handling fees, and income taxes No material changes to these policies were reported[196] Recently Adopted Accounting Standards This section reports on new accounting standards that the company has recently implemented - No recently adopted accounting standards were reported[197] Recently Issued Accounting Standards This section discusses new accounting standards that have been issued but not yet adopted by the company - No recently issued accounting standards material to the company were reported[198] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section refers to previous disclosures regarding market risk exposures, noting no material changes except for the minimum hedging requirement under the Bank Credit Facility - No material changes to market risk disclosures were reported, except for the minimum hedging requirement under the Bank Credit Facility[199] Item 4. Controls and Procedures Management, including the principal executive and financial officers, evaluated the effectiveness of disclosure controls and procedures, concluding they were effective as of September 30, 2022. No material changes to internal control over financial reporting occurred during the quarter - Disclosure controls and procedures were evaluated and deemed effective as of September 30, 2022[200] - No material changes in internal control over financial reporting occurred during the quarter ended September 30, 2022[201] PART II — OTHER INFORMATION This part contains additional disclosures not included in the financial statements section Item 1. Legal Proceedings The company entered into a settlement agreement on March 23, 2022, to receive $27.5 million to resolve previously pending litigation against a third-party supplier. No additional material developments were reported - The company received $27.5 million from a settlement agreement on March 23, 2022, resolving litigation against a third-party supplier[204] Item 1A. Risk Factors This section refers to previously reported risk factors in the 2021 Annual Report and other SEC filings, stating that no material changes have occurred - No material changes in risk factors were reported from those described in the 2021 Annual Report or other SEC filings[206] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section reports on any sales of equity securities not registered under the Securities Act Item 3. Defaults Upon Senior Securities This section discloses any instances of default on the company's senior debt obligations Item 4. Mine Safety Disclosures This section states the applicability or non-applicability of mine safety reporting requirements to the company Item 5. Other Information This section includes any other material information not covered in previous items Item 6. Exhibits This section lists all exhibits filed with the Quarterly Report on Form 10-Q, including merger agreements, certificates of incorporation, bylaws, indentures, registration rights agreements, and certifications SIGNATURES This section contains the required signatures for the filed report