b'to be accurate indicators of the success of developing proved reserves from our discoveries andprospects. Furthermore, we have no way of evaluating the accuracy of the data from analog wells orprospects produced by other parties which we may use.It is possible that few or none of our wells to be drilled will find accumulations of hydrocarbons incommercial quality or quantity. Any significant variance between actual results and our assumptionscould materially affect the quantities of hydrocarbons attributable to any particular prospect.Drilling wells is speculative, often involving significant costs that may be more than we estimate, and may notresult in any discoveries or additions to our future production or reserves. Any material inaccuracies indrilling costs, estimates or underlying assumptions will materially affect our business.Exploring for and developing hydrocarbon reserves involves a high degree of technical, operationaland financial risk, which precludes definitive statements as to the time required and costs involved inreaching certain objectives. The budgeted costs of planning, drilling, completing and operating wells areoften exceeded and can increase significantly when drilling costs rise due to a tightening in the supplyof various types of oilfield equipment and related services or unanticipated geologic conditions.Before a well is spud, we incur significant geological and geophysical (seismic) costs, which areincurred whether or not a well eventually produces commercial quantities of hydrocarbons or is drilledat all. Drilling may be unsuccessful for many reasons, including geologic conditions, weather, costoverruns, equipment shortages and mechanical difficulties or force majeure events. Exploratory wellsbear a much greater risk of failure than development wells. In the past we have experiencedunsuccessful drilling efforts, having drilled dry holes. Furthermore, the successful drilling of a well doesnot necessarily result in the commercially viable development of a field or be indicative of the potentialfor the development of a commercially viable field. A variety of factors, including geologic and market-related, can cause a field to become uneconomic or only marginally economic. A lack of drillingopportunities or projects that cease production may cause us to incur significant costs associated withan idle rig and/or related services, particularly if we cannot contract out rig slots to other parties. Manyof our prospects that may be developed require significant additional exploration, appraisal anddevelopment, regulatory approval and commitments of resources prior to commercial development. Inaddition, a successful discovery would require significant capital expenditure in order to develop andproduce oil and natural gas, even if we deemed such discovery to be commercially viable. See Ourbusiness plan requires substantial additional capital, which we may be unable to raise on acceptableterms or at all in the future, which may in turn limit our ability to develop our exploration, appraisal,development and production activities. In the areas in which we operate, we face higher above-groundrisks necessitating higher expected returns, the requirement for increased capital expenditures due to ageneral lack of infrastructure and underdeveloped oil and gas industries, and increased transportationexpenses due to geographic remoteness, which either require a single well to be exceptionallyproductive, or the existence of multiple successful wells, to allow for the development of a commerciallyviable field. See Our operations may be adversely affected by political and economic circumstancesin the countries in which we operate. Furthermore, if our actual drilling and development costs aresignificantly more than our estimated costs, we may not be able to continue our business operations asproposed and could be forced to modify our plan of operation.Development drilling may not result in commercially productive quantities of oil and gas reserves.Our exploration success has provided us with major development projects on which we are movingforward, and any future exploration discoveries will also require significant development efforts to bringto production. We must successfully execute our development projects, including development drilling,in order to generate future production and cash flow. However, development drilling is not alwayssuccessful and the profitability of development projects may change over time.43'