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• | the impact on Compass if it is unable to successfully execute or consummate one or more disposition, acquisition or reserve development opportunities; |
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• | Compass’ ability to market and sell its oil, natural gas liquids and natural gas and its exposure to the credit risk of its customers, working interest owners and other counterparties and the risks associated with drilling activities; |
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• | the inherent uncertainty of estimates of oil and natural gas reserves; |
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• | the risk that Compass will be unable to identify or complete, or complete on economically attractive terms, suitable disposition and/or acquisition opportunities of oil and gas properties; |
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• | Compass’ ability to successfully operate in a highly regulated and litigious environment, including exposure to operating hazards and uninsured risks; |
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• | Compass’ ability to effectively mitigate the impact of commodity price volatility from its cash flows with its hedging strategy; |
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• | changes in the U.S. federal income tax laws and regulations that may affect the relative income tax advantages of Compass’ products; |
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• | the impact of future and existing environmental regulations; |
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• | the effects of climate change and unusual weather activity; |
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• | the intense competition in the oil and gas industry, including acquiring properties, contracting for drilling equipment and hiring experienced personnel; and |
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• | the unavailability of pipelines or other facilities interconnected to Compass’ gathering and transportation pipelines. |
We caution the reader that undue reliance should not be placed on any forward-looking statements, which speak only as of the date of this document. Neither we nor any of our subsidiaries undertake any duty or responsibility to update any of these forward-looking statements to reflect events or circumstances after the date of this document or to reflect actual outcomes.
The Company and its subsidiaries are also involved in an number of litigation and claims related to their current and prior businesses. See below and Note 13, Commitments and Contingencies, to the Company’s Condensed Consolidated Financial Statements included in Part I - Item 1. Financial Statements. However, based on currently available information, including legal defenses available to the Company, and given the aforementioned accruals and related insurance coverage, the Company does not believe that the outcome of these legal, environmental and regulatory matters will have a material effect on its financial position, results of operations or cash flows.
A purported class and derivative action was filed in March 2014 in the Delaware Court of Chancery (the “Court”) by plaintiff Haverhill Retirement System (“Plaintiff”) upon HRG, as nominal defendant, the members of HRG’s board of directors (“Board”), as defendants, Harbinger Capital Partners LLC (“HCP LLC”) and certain of its affiliated funds (collectively, the “Harbinger Funds”), each a stockholder of HRG and a defendant, and Leucadia National Corporation (“Leucadia”), a stockholder of HRG and a defendant. The complaint alleges, among other things, that the defendants breached their fiduciary duties in connection with certain transactions involving Leucadia.
Specifically, on March 18, 2014, Leucadia purchased 23.0 million shares of preferred stock issued by subsidiaries of the Harbinger Funds for $253.0 million, which shares Leucadia was entitled to exchange for shares of HRG common stock owned by the Harbinger Funds (the “Exchange”). Also on March 18, 2014, a special committee of the Board, and subsequently the full Board, approved certain agreements with Leucadia, including (a) a letter agreement (the “Letter Agreement”) that contemplated (i) a waiver in favor of Leucadia of the three-year standstill period established by Article IX of HRG’s certificate of incorporation (“Charter”) for a business combination between HRG and owners of 15.0% or more of HRG’s voting stock; (ii) a two-year standstill period during which Leucadia could not seek a business combination with HRG, acquire more than 27.5% of HRG’s voting stock, or influence other HRG stockholders in voting their shares; (iii) “lock-up” provisions that prevent Leucadia from selling HRG shares to any stockholder who would own more than 4.9% of HRG’s voting stock as a result of such sale; and (iv) Leucadia’s right to immediately appoint two Board observers and, upon the completion of the Exchange, expansion of the Board by two seats to be filled by Leucadia nominees; and (b) the Company’s acknowledgment that Leucadia would succeed to certain of the Harbinger Funds’ rights under a pre-existing registration rights agreement between HRG and the Harbinger Funds (the “Acknowledgment”).
Plaintiff’s complaint alleges that the Harbinger Funds and HRG’s then-CEO and then-Chairman Philip A. Falcone were the controlling stockholders of HRG and used their control over HRG to cause HRG to make valuable concessions to Leucadia through the Letter Agreement and the Acknowledgment so that the Harbinger Funds could obtain a better price for their shares in connection with the Exchange. The complaint further alleges that the Board breached its fiduciary duties by approving the Letter Agreement and the Acknowledgment, and that Leucadia aided and abetted those breaches of fiduciary duties. The complaint further alleges that the Letter Agreement violated the Board classification provisions in HRG’s Charter, which require that the Board “be classified
