The Company’s domestic and international operations are subject to extensive laws and regulations and may be adversely affected by the actions and decisions of many federal, state, local and international governments, political interests and advocacy groups.
Changes in U.S. and international tax laws, regulations and interpretations, as well as examinations by taxing authorities, could adversely affect the Company’s effective tax rate, financial condition and results of operations. Tax laws and their interpretation may change, including through repeal or modification of existing provisions, creating uncertainty regarding their impact on the Company’s tax obligations and cash flows. Additionally, the Company’s tax positions are subject to examination by tax authorities, and the resolution of such matters may differ from amounts recorded in the financial statements. Governments may increase existing taxes, eliminate tax incentives or enact new taxes, such as windfall profit taxes or taxes targeting the oil and gas industry. For example, the IRA enacted a 15% corporate alternative minimum tax (CAMT) and a 1% excise tax on net share repurchases. Furthermore, the recently enacted OBBBA made permanent the 21% corporate tax rate, reinstated 100% bonus depreciation on assets placed in service after January 19, 2025, reinstated the deduction for certain research and development expenses, adjusted deduction limits, imposed new environmental levies and imposed limitations on certain clean energy credits, which may change the Company’s tax liability and compliance costs. While the IRA and OBBBA expanded policy support for certain low-carbon projects and enhanced certain tax credits, these benefits remain subject to administrative action, regulatory interpretation and potential legislative repeal. For instance, recent executive orders and proposals to rescind or reduce funding for these programs create uncertainty regarding the long-term realization of such credits. Unfavorable changes, interpretations or audit outcomes or sunsetting of certain provisions could result in increased tax liabilities, interest and penalties. For additional discussion of some of these matters, see Note 9 - Income Taxes in the Notes to Consolidated Financial Statements in Part II Item 8 of this Form 10-K.
Furthermore, instability and unforeseen changes in political, regulatory, economic and social environments in the markets where the Company operates could result in business disruptions, contractual or regulatory changes or operational challenges. As a result, the Company faces risks of, but not limited to, the following:
- Uncertain or volatile political, social and economic conditions;
- Political instability, social unrest, terrorism, war or armed conflict;
- Public health crises or other catastrophic events, such as pandemics;
- Confiscatory taxation or other adverse tax policies or currency controls;
- Trade regulations, tariffs or sanctions;
- Theft of, or lack of sufficient legal protection for, proprietary technology and other intellectual property;
- Changes in laws, regulations or interpretation or enforcement practices, including those related to drilling, completions, production, environmental protection, taxation, royalties, trade and climate change;
- Restrictions on the repatriation of income or capital;
- Inflation, currency fluctuations or changes in global trade practices;
- Changes in the usage of the U.S. dollar in global trade;
- Expropriation, nationalization or loss of property rights;
- Delays or refusals in granting or renewing permits, licenses or contracts, including for exploration, development or production contracts or leases;
- Developmental delays and cost overruns due to approval delays for, or denial of, drilling, construction, environmental and other regulatory approvals, permits and authorizations; and
- Litigation, investigations or penalties arising from changes in law or government action or violation of laws or regulations.
The realization of any of these risks could increase costs, limit access to resources, delay or halt projects or restrict the Company’s ability to operate in certain jurisdictions. Such developments may also result in litigation, penalties or operational shutdowns. In addition, restrictions imposed by the U.S. or international governments could limit the Company’s ability to acquire or divest assets, repatriate earnings or maintain licenses and permits necessary for drilling and development. Domestic and international regulatory efforts are evolving, including the international alignment of such efforts, and the Company cannot predict what final regulations will be enacted, modified or reversed or what their ultimate impact on the Company’s business would be. Currency fluctuations and other economic uncertainties may further impact cash flows. Any of these factors could materially affect the Company’s financial condition, results of operations and cash flows.