b'Item 1A. Risk FactorsYou should consider and read carefully all of the risks and uncertainties described below, together withall of the other information contained in this report, including the consolidated financial statements and therelated notes included in Item 8. Financial Statements and Supplementary Data. If any of the followingrisks actually occurs, our business, business prospects, financial condition, results of operations or cash flowscould be materially adversely affected. The risks below are not the only ones we face. Additional risks notcurrently known to us or that we currently deem immaterial may also adversely affect us.Risks Relating to the Oil and Natural Gas Industry and Our BusinessWe have limited proved reserves and areas that we decide to drill may not yield oil and natural gas incommercial quantities or quality, or at all.We have limited proved reserves. A portion of our oil and natural gas assets consists of discoverieswithout approved PoDs and with limited well penetrations, as well as identified yet unproven prospectsbased on available seismic and geological information that indicates the potential presence ofhydrocarbons. However, the areas we decide to drill may not yield oil or natural gas in commercialquantities or quality, or at all. Many of our current discoveries and all of our prospects are in variousstages of evaluation that will require substantial additional analysis and interpretation. Even whenproperly used and interpreted, 2D and 3D seismic data and visualization techniques are only tools usedto assist geoscientists in identifying subsurface structures and hydrocarbon indicators and do not enablethe interpreter to know whether hydrocarbons are, in fact, present in those structures. Accordingly, wedo not know if any of our discoveries or prospects will contain oil or natural gas in sufficient quantitiesor quality to recover drilling and completion costs or to be economically viable. Even if oil or naturalgas is found on our discoveries or prospects in commercial quantities, construction costs of gatheringlines, subsea infrastructure and floating production systems and transportation costs may prevent suchdiscoveries or prospects from being economically viable, and approval of PoDs by various regulatoryauthorities, a necessary step in order to develop a commercial discovery, may not be forthcoming.Additionally, the analogies drawn by us using available data from other wells, more fully exploreddiscoveries or producing fields may not prove valid with respect to our drilling prospects. We mayterminate our drilling program for a discovery or prospect if data, information, studies and previousreports indicate that the possible development of a discovery or prospect is not commercially viableand, therefore, does not merit further investment. If a significant number of our discoveries orprospects do not prove to be successful, our business, financial condition and results of operations willbe materially adversely affected.The deepwater offshore Mauritania and Senegal, an area in which we currently focus a substantialamount of our development efforts, has only recently been considered economically viable forhydrocarbon production due to the costs and difficulties involved in drilling and development at suchdepths and the relatively recent discovery of commercial quantities of hydrocarbons in the region.Likewise, our deepwater offshore Cote dIvoire, Namibia, Sao Tome and Principe and Surinamelicenses have not yet proved to be economically viable production areas. We have limited provedreserves, and we may not be successful in developing additional commercially viable production fromour other discoveries and prospects.We face substantial uncertainties in estimating the characteristics of our unappraised discoveries and ourprospects.In this report we provide numerical and other measures of the characteristics of our discoveriesand prospects. These measures may be incorrect, as the accuracy of these measures is a function ofavailable data, geological interpretation and judgment. To date, a limited number of our prospects havebeen drilled. Any analogies drawn by us from other wells, discoveries or producing fields may not prove42'