Overview of Principal Risks

The economic outcomes of the project are sensitive to commodity prices, production performance, operating conditions, regulatory requirements, and broader macroeconomic factors. Even with experienced operators, engineering data, and conservative modeling, outcomes can differ materially from expectations.

The full risk factor discussion is contained in the offering documents and supporting schedules. This page is intended only as a high-level summary of the types of risks investors should consider.

Illustrative Risk Matrix (Qualitative)
Risk category Impact Likelihood
Commodity price and market High Medium–High
Reservoir, geological, and technical High Medium
Operational and midstream Medium–High Medium
Regulatory, ESG, and surface Medium Medium
Financial, structural, and tax Medium Low–Medium
Interpretation
  • Matrix is a high-level, qualitative view of relative risk only.
  • It does not replace the detailed risk factor discussion in the formal offering documents.

Commodity Price and Market Risk

Natural Gas Price Volatility
  • Project economics are highly sensitive to natural gas prices at Henry Hub and to regional basis differentials.
  • Sustained periods of lower-than-expected gas prices can materially reduce revenue, delay payout, and compress returns.
  • Forward curves, hedging strategies, and price decks may not reflect future spot or realized prices.

The base case uses a reference price of $2.58/Mcf, but actual realized prices may be higher or lower and may be subject to basis, tariffs, and other commercial terms.

Macro and Demand-Side Factors
  • Changes in regional or global gas demand (e.g., industrial demand, LNG exports, weather patterns) can impact prices and basis.
  • Energy transition policies, ESG pressures, and competing supply sources can affect long-term demand for natural gas.
  • Market disruptions, transportation constraints, and storage dynamics can lead to unexpected price volatility.

There can be no assurance that current or historical price relationships will persist over the life of the project.

Reservoir, Geological, and Operational Risk

Subsurface and Reservoir Uncertainty
  • Engineering estimates of gas in place and recovery are derived from available data, which may be incomplete or subject to interpretation.
  • Actual deliverability, decline rates, and recoveries may differ meaningfully from modeled expectations.
  • Bypassed pays, compartmentalization, water production, or mechanical issues may reduce recoverable volumes or impact well performance.

Technical risk is partially mitigated by prior production history and engineering work, but it cannot be eliminated.

Operational and Mechanical Risk
  • Workovers, recompletions, and facility upgrades may encounter mechanical failures, cost overruns, or schedule delays.
  • Unexpected wellbore conditions, equipment failures, or service constraints may impair production or increase costs.
  • Production may be temporarily or permanently curtailed due to field incidents, regulatory requirements, or vendor performance.

Operational risk can affect both the timing and magnitude of production and, therefore, cash flows and returns.

Additional technical detail is provided on the Geology & Reservoirs and Operations & Facilities pages, and in the technical schedules available in the Data Room.

Regulatory, ESG, and Surface Risk

Regulatory and Permitting
  • Operations are subject to federal, state, and local regulations, including permitting, reporting, environmental, and safety requirements.
  • Changes in law, regulation, or enforcement practices may impact project timing, cost, or feasibility.
  • Non-compliance, even if inadvertent, can result in penalties, fines, or forced shutdowns.

The operator seeks to maintain robust compliance practices, but regulatory risk is inherent in the sector.

ESG, Environmental, and Surface Impacts
  • Environmental incidents, spills, emissions, or surface impacts can result in remediation costs, claims, or reputational damage.
  • ESG expectations from investors, regulators, and communities may evolve, influencing capital access and project economics.
  • Surface access, landowner relations, and community concerns can affect the timing or scope of operations.

ESG and stewardship practices are described in more detail on the ESG & Stewardship page and in the compliance framework.

Further information on legal and regulatory matters is provided on the Compliance page and in the offering documents.

Counterparty, Midstream, and Infrastructure Risk

Midstream and Takeaway
  • The project depends on third-party midstream and pipeline infrastructure for gathering, processing, and sales.
  • Outages, constraints, contract renegotiations, or counterparty issues can reduce volumes or netbacks.
  • Changes in tariffs or commercial terms can impact project-level economics.

Details regarding midstream and infrastructure assumptions are summarized on the Midstream & Infrastructure page.

Vendor and Counterparty Performance
  • Field operations rely on service companies, vendors, and contractors whose performance, availability, and pricing can vary.
  • Credit risk of purchase and sales counterparties may affect payment timing or collection risk.
  • Disputes, contract terminations, or insolvency of key counterparties can adversely impact operations.

Counterparty risk is managed through contract structuring, vendor selection, and ongoing monitoring, but it cannot be fully eliminated.

Financial, Structural, and Tax Risk

Capital Structure and Liquidity
  • The project depends on raising and deploying capital on the terms contemplated; any shortfall or delay may impact scope or timing.
  • Future capital needs (e.g., additional workovers, facilities) may require incremental funding on terms that are uncertain.
  • There is no public market for interests in the project; liquidity is limited and exit options may be constrained.

Investors should assume a long-term, illiquid commitment and review the capital structure as described in the offering documents.

Tax, Legal, and Structural Considerations
  • Tax treatment of oil and gas investments can be complex and may change due to new legislation, regulation, or interpretation.
  • Individual investor tax outcomes depend on specific circumstances and jurisdictions.
  • Legal structure, rights, and obligations under the joint operating agreement and other documents may not align with all investor preferences.

Prospective investors must consult their own legal and tax advisors. A separate discussion is provided on the Tax Considerations page and in the formal disclosures.

Governance, Reporting, and Alignment

Governance, reporting, and alignment mechanisms are designed to manage risk, but they do not remove underlying business risk. The operator’s experience, systems, and incentives are important considerations in any evaluation.

  • Joint operating agreement, subscription agreements, and related documents define rights, obligations, and decision-making.
  • Regular production and financial reporting are intended to support investor transparency and oversight.
  • Working Interest allocation and waterfall structure are designed to align operator and investor interests.

Governance, leadership, and track record are described on the About / Leadership, Team, and Compliance pages.

Important Notice

This summary of risk factors is for informational purposes only. It does not constitute investment, legal, tax, or other advice and does not replace the detailed risk disclosures in the formal offering documents.

Any investment in the project is suitable only for sophisticated investors who can bear the risk of a partial or total loss of capital and should be made solely on the basis of definitive documentation provided by Safari Production Company, Inc.

Next Steps for Qualified Investors

Prospective investors should review the full set of economic, technical, legal, and risk disclosures before making any commitment. The Safari Production Company, Inc. team is available to walk through the model, sensitivities, and risk framework in more detail.

  • Request the detailed investment memorandum and full risk factor section.
  • Review the 7-year economic model and sensitivity scenarios.
  • Access technical and regulatory documentation in the Data Room.
  • Engage with the team to discuss structure, governance, and alignment.

Nothing on this page is, or should be construed as, a solicitation or an offer to buy or sell any security.

Engage with Safari Production Company, Inc.
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