APA: 10-K Risk Factor Changes

In 2022, the Company modified the way it reports its water data compared to previous years and restated its data from prior years. Previously, the Company included produced water usage in its consumptive use calculations, which led to an over-reporting of consumptive water use. Based on re-evaluation of water reporting definitions and guidance, the Company determined that produced water (non-potable water released from deep underground formations and brought to the surface during oil and gas exploration and production) should not be classified as consumed in the same sense as fresh water. The Company’s revised reporting now reflects only fresh water and non-potable water from surface water or shallow groundwater that are consumed in oil and gas operations.

On January 3, 2024, the Company entered into a definitive agreement (the Merger Agreement) to acquire Callon. The respective obligations of each of the Company and Callon to consummate the merger are subject to the satisfaction at or prior to the closing of numerous conditions, including the approval of both the Company’s and Callon’s stockholders, the absence of any law or order prohibiting the consummation of the merger, and the expiration or termination of the waiting period (and any extension of such period) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. Many of the 28 28 28 conditions to completion of the merger are not within either the Company’s or Callon’s control, and the Company cannot predict when, or if, these conditions will be satisfied. Furthermore, the requirement for obtaining the required regulatory clearances could delay the completion of the merger for a significant period of time or prevent it from occurring. Regulators may seek to enjoin the completion of the merger, seek divestiture of substantial assets of the parties, or require the parties to license, or hold separate, assets or terminate existing relationships and contractual rights.

If the merger is not completed for any reason, including as a result of failure to obtain all requisite regulatory and stockholder approvals, the ongoing business of the Company may be materially adversely affected and, without realizing any of the benefits of having completed the merger, the Company would be subject to a number of risks, including the following: •the Company may experience negative reactions from the financial markets, including negative stock price impacts; •the Company may experience negative reactions from commercial and business partners; •the Company will still be required to pay significant costs relating to the merger, such as legal, accounting, financial advisor, and printing fees; and •the Company may be required to pay up to a $170 million termination fee to Callon or reimburse up to $48 million of Callon’s expenses, as required by the Merger Agreement.

Whether or not the merger is completed, the announcement and pendency of the merger could cause disruptions to the Company’s business, including: •uncertainties associated with the merger may cause a loss of management personnel and other key employees of the Company, which could adversely affect the future business and operations of the Company following the merger; •the business relationships of the Company may be subject to disruption due to uncertainty associated with the merger, which could have a material adverse effect on the Company’s results of operations, cash flows, and financial position; •matters relating to the merger (including integration planning) require substantial commitments of time and resources by the Company’s management, which may result in the distraction of the Company’s management from ongoing business operations and pursuing other opportunities that could be beneficial to the Company; and •the Merger Agreement places certain restrictions on the conduct of the Company, which may delay or prevent the Company from undertaking business opportunities that, absent the Merger Agreement, may have been pursued.

The success of the merger will depend on, among other things, the combined company’s ability to integrate the Company’s and Callon’s businesses in a manner that realizes anticipated synergies and benefits and meets or exceeds the forecasted stand-alone cost savings anticipated by the combined company. If the combined company is not able to successfully achieve these synergies, or the cost to achieve these synergies is greater than expected, then the anticipated benefits of the merger may not be realized fully or at all or may take longer to realize than expected. If the transaction closes, it is possible that the integration process could result in the loss of key Company employees or key Callon employees, the loss of customers, providers, vendors, or business partners, the disruption of either company’s or both companies’ ongoing businesses, inconsistencies in standards, controls, procedures, and policies, potential unknown liabilities and unforeseen expenses, delays, or regulatory conditions associated with and following completion of the merger, or higher than expected integration costs and an overall post-completion integration process that takes longer than originally anticipated. In addition, at times the attention of certain members of the Company’s management and resources may be focused on completion of the merger and planning the integration of the businesses of the two companies and diverted from day-to-day business operations or other opportunities that may have been beneficial to the Company, which may disrupt the Company’s ongoing business and the business of the combined company. 29 29 29

Securities class action lawsuits and derivative lawsuits are often brought against public companies that have entered into acquisition, merger, or other business combination agreements. Even if such a lawsuit is without merit, defending against these claims can result in substantial costs and divert management time and resources. An adverse judgment could result in monetary damages, which could have a negative impact on the Company’s liquidity and financial condition. There can be no assurance that any of the defendants will be successful in the outcome of any pending or any potential future lawsuits. The defense or settlement of any lawsuit or claim that remains unresolved at the time the merger is completed may adversely affect the Company’s business, financial condition, results of operations, and cash flows.