NPWR Filings — Net Power Inc.

NPWR Filings — Net Power Inc. - FilingSpy

10-Q · Quarter ended Jun 30, 2026 · SEC filing ↗

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Management's Discussion and Analysis

The following management’s discussion and analysis (“MD&A”) provides information that management believes is relevant to an assessment and understanding of our condensed consolidated results of operations and financial condition and includes forward-looking statements that involve risks, uncertainties and assumptions, including those described in “Cautionary Note Regarding Forward-Looking Statements” included in the forepart of this Quarterly Report on Form 10-Q (our “Quarterly Report”), in Part II, Item 1A Risk Factors in this Quarterly Report, and in Part I, Item 1A Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2025 (our “Annual Report”), as filed with the SEC on March 9, 2026. The following MD&A should be read in conjunction with our condensed consolidated financial statements and related notes included in Part I, Item 1 in this Quarterly Report and our audited consolidated financial statements and related notes included in our Annual Report. Overview We are an energy technology and project development company focused on the development of natural gas power generation projects. Historically, our sole business has been the development of a novel oxy-combustion power generation system designed to produce reliable and affordable electricity from natural gas while capturing virtually all atmospheric emissions. As part of our strategic shift to meet growing market demand for reliable power on accelerated timelines, we have broadened our development activities to include traditional gas power generation equipment and PCC solutions. Our near-term commercial strategy prioritizes the rapid deployment of natural gas power generation to serve large-load customers, initially without carbon capture. We are engaged in ongoing negotiations with Entropy regarding one or more potential commercial arrangements relating to the deployment of its PCC Technology for projects we develop. The parties’ prior letter of intent has expired by its terms and has not been replaced, no definitive agreement has been executed, and either party may discontinue negotiations at any time. There can be no assurance that definitive agreements with Entropy will be executed on any particular terms, within any particular timeframe, or at all. We are not contractually committed to any single technology provider, and we continue to evaluate technology, partnership and project structures that support that strategy. We undertake no obligation to provide updates regarding the status of these negotiations except as required by applicable law. See Part II, Item 1A “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements.” Under our current strategy, our projects are expected to generate revenue from the sale of the products and attributes they produce, principally electricity and, where carbon capture is deployed, captured CO₂ and associated environmental attributes. If and to the extent carbon capture is deployed at Project Permian Phase I or any subsequent phase, captured CO₂ is intended to be sold or delivered for sequestration in connection with enhanced oil recovery operations in the Permian Basin or for other geologic storage. We have not entered into any definitive agreement for the sale, transportation, or sequestration of CO₂, and there can be no assurance that we will enter into any such agreement on acceptable terms or at all. Beginning in the fourth quarter of 2025 and continuing through 2026, we repositioned our business around the commercial deployment of natural gas power generation equipment designed to accommodate post-combustion carbon capture technology in later phases. Currently, we do not have any plans to resume development of the Oxy-Combustion Cycle, nor do we expect the initial phase of Project Permian Phase I to include carbon capture. Consistent with these current plans, we have suspended development activities under the BHES JDA, we have adjusted our workforce in areas affected by these changes, and we have recognized a full impairment of the related developed technology assets (see Note 5 to our condensed consolidated financial statements). 24 Table of Contents Key Factors Affecting Our Prospects and Future Results We believe that our performance and future success depend on a number of factors that present significant opportunities for us but also pose risks and challenges, including, but not limited to: our ability to negotiate and enter into binding power offtake agreements at prices and on terms sufficient to support project financing and a FID; the timing and outcome of grid interconnection processes, including ERCOT’s recently adopted batch framework for large-load interconnection and the verification and audit of data center projects directed by the Governor of Texas on August 3, 2026; the timing and outcome of air permitting for the generation configuration we ultimately select, the basis for which has not been confirmed and which may change if that configuration changes; the availability, cost, and delivery timing of gas turbines and related long-lead equipment, for which manufacturer backlogs currently extend multiple years; our ability to license PCC technology from Entropy or other providers; our ability to identify, acquire, or develop co-located load resources, including through land, interconnection queue positions, options, or co-development arrangements, and to obtain the related regulatory and interconnection approvals; potential supply chain issues, including as a result of tariffs or cost escalation; changes in tax policies and other incentives supporting carbon capture, including the federal tax credit available under Section 45Q of the Internal Revenue Code, as enhanced by the Inflation Reduction Act of 2022 and further amended by the One Big Beautiful Bill Act of 2025 (which, for facilities or equipment placed in service after July 4, 2025, provides credit values of up to $85 per metric ton for qualified carbon oxide used as a tertiary injectant in enhanced oil or natural gas recovery or otherwise utilized, in parity with secure geological storage), the value, transferability, and monetization of which are subject to evolving statutory and regulatory requirements; our access to the capital needed to finance the development of our projects; and development of competing energy technologies sooner or at a lesser cost than our products, including natural gas combined-cycle plants without carbon capture, renewable generation paired with battery energy storage systems and small modular nuclear reactors, many of which are being pursued by developers with greater financial resources and established customer relationships. Supply chain issues related to the manufacturing and transportation of key equipment, including as a result of tariffs imposed by the U.S. or other countries or other trade barriers, measures, or conflicts, including the ongoing conflicts in the Middle East, may lead to a delay in our commercialization efforts, which could impact our results of operations, financial condition and prospects. Also, currency fluctuations, inflation, tariffs, and other trade barriers, measures or conflicts may significantly increase freight charges, raw material costs and other expenses associated with our business, and such increased costs could materially and adversely affect our results of operations, financial condition and prospects. Commencing Commercial Operations We are developing our first commercial power generation project at the Project Permian site in West Texas. The project is being sized to accommodate up to approximately one gigawatt of power generation capacity, to be developed in phases, with the configuration, carbon capture scope and ancillary solutions for each phase dependent on customer requirements, commercial arrangements, equipment availability, and financing, and potentially including natural gas generation deployed in advance of, or without, carbon capture. Based on current market demand and the commercial feedback we have received, we do not expect to deploy post-combustion carbon capture in the initial phase of Project Permian. Development of the contemplated capacity would also require additional land and development rights beyond those we currently hold. We intend for the first phase of Project Permian to utilize gas-driven power generation equipment, including gas turbines; the carbon capture configuration of the project, including the scope and timing of any PCC deployment, will be determined in connection with definitive commercial arrangements and financing. On November 12, 2025, we entered into an agreement to purchase two modular gas turbine generator sets with nominal gross power of approximately 30 megawatts each for use in Project Permian Phase I. We lease the Project Permian Phase I site from a subsidiary of Occidental Petroleum, which is a significant stockholder and a related party of the Company, under a lease that became effective December 1, 2024 and has a 60-month initial term, and that includes an option to purchase the leased premises.Our leasehold provides the acreage required to site the power generation equipment we have contracted to purchase and to support the initial phase of the project as currently configured, and the site is located within a larger ranch owned by affiliates of Occidental Petroleum. Developing the project beyond the initial phase would require additional land 25 Table of Contents rights from those affiliates, which we have not obtained and which would be subject to negotiation and to their consent, and a co-located configuration would require additional or different site and land-use arrangements that we have not obtained. The Project Permian site is being designed with flexibility to meet potential customers’ needs. The project is being evaluated for the potential addition of carbon capture in later phases, which if deployed may be installed either concurrent with or subsequent to the installation of the accompanying gas power generation equipment. The engineering and cost of that capability have not been finalized. Carbon capture would be deployed subject to customer requirements, the availability of post-combustion carbon capture technology on acceptable terms, the availability of arrangements for the transportation, utilization or sequestration of captured carbon dioxide, none of which we have entered into, permitting, and financing. We may also seek to interconnect the project’s power generation facilities to the ERCOT grid, subject to the interconnection processes described in Part II, Item 1A. We have not entered into a binding power offtake agreement, project-level financing agreement, or definitive site or land-use arrangement specific to a co-located configuration, and we have not made a final investment decision for Project Permian Phase I. There can be no assurance that we will enter into any such agreement, that Project Permian Phase I will be developed in the configuration or on the timeline described, or that carbon capture will be deployed at any phase of the project. Our development planning previously targeted a final investment decision as early as the second half of 2026. We no longer expect an FID to occur during 2026, and we have not established a new target date for FID or the commencement of commercial operations. Any FID will depend on, among other things, execution of one or more binding power offtake arrangements at pricing and other terms supportive of the project’s economics, and on obtaining the necessary site rights, financing, equipment, permits and other approvals. We do not expect to make an FID before such arrangements are executed. In order to meet prospective customer requirements for first power or more power than our current contracted equipment can deliver, we are evaluating whether to enter into additional commitments for power generation equipment and related long-lead items prior to FID and before execution of a binding power offtake agreement, as described under “Commitments and Contractual Obligations — Equipment Commitments Under Consideration” below. There can be no assurance as to the timing or outcome of the customer selection process, the FID process, or the product configuration, including its scope, cost or timing of project operations. On August 3, 2026, the Governor of Texas directed the Public Utility Commission of Texas and ERCOT to conduct a comprehensive verification and audit of data center projects advancing through ERCOT’s interconnection process before additional data center projects are approved to move forward, and directed that projects failing to comply with applicable requirements be denied connection to the Texas grid. Our offtake process for Project Permian Phase I is directed primarily at data center developers and other large-load customers. That process, any requirements the Public Utility Commission of Texas or ERCOT may adopt in response, and any resulting legislation could extend the timelines on which prospective customers are able or willing to commit to binding power offtake arrangements, or could reduce the number of prospective customers able to proceed in ERCOT. We cannot predict the scope, duration, or outcome of that process. If it delays or prevents commitments by prospective customers, our final investment decision for Project Permian Phase I could be delayed could be further delayed or may not occur, and the timing of our capital requirements and project-level financing would be affected. Key Components of Results of Operations We are a pre-revenue, development-stage company. Because our historical spending was primarily directed toward the Oxy-Combustion Cycle, the La Porte Demonstration Facility and SN1, none of which we are actively developing today, our historical results may not be indicative of future results. The impairment of the Developed Technology Asset Group, suspension of the BHES JDA, workforce reductions and changes in project development activities materially affect comparability between periods. 26 Table of Contents Results of Operations Comparison of the Three Months Ended June 30, 2026 to the Three Months Ended June 30, 2025 The following table sets forth our condensed consolidated results of operations data for the periods presented: Three Months Ended June 30, $ Change % Change $ in thousands 2026 2025 Operating expenses General and administrative $ 6,419 $ 13,578 (7,159) (53) % Sales and marketing 1,017 1,492 (475) (32) % Research and development 4,220 26,618 (22,398) (84) % Project development 1,126 27,198 (26,072) (96) % Impairment and other charges 193,708 — 193,708 n/a Depreciation, amortization, and accretion 3,452 21,669 (18,217) (84) % Total operating expenses 209,942 90,555 Operating loss (209,942) (90,555) Other income Interest income, net 2,963 5,466 (2,503) (46) % Change in Earnout Shares liability and Warrant liability 46 1,415 (1,369) (97) % Other income 3 5 (2) (40) % Net other income 3,012 6,886 Net loss before income tax (206,930) (83,669) Income tax (expense) benefit (2) 1,622 (1,624) (100) % Net loss after income tax (206,932) (82,047) Net loss attributable to non-controlling interests (126,641) (53,905) Net loss attributable to NET Power Inc. $ (80,291) $ (28,142) General and administrative General and administrative expenses consist primarily of personnel-related expenses associated with our general and administrative organization and professional fees for legal, accounting, information technology, and other consulting services. General and administrative expenses decreased by $7.2 million, or 53%, for the three months ended June 30, 2026, as compared to the same period in 2025. This decrease was primarily related to lower overall compensation expense due to headcount reduction during the first quarter of 2026. Additionally, during the second quarter of 2025, the Company terminated certain members of its executive management team, resulting in $3.1 million of severance costs and $1.1 million of accelerated share-based compensation. In addition, there were lower professional fees of $1.4 million primarily related to decreased engineering consulting and legal costs. Sales and marketing Sales and marketing expenses consist primarily of personnel-related and consultant costs directly associated with our sales and marketing activities, which include general publicity efforts for the Company. Sales and marketing expenses decreased by $0.5 million, or 32%, for the three months ended June 30, 2026, as compared to the same period in 2025. This decrease was primarily related to lower compensation costs due to employee terminations during 2026. 27 Table of Contents Research and development Research and development (“R&D”) expenses in the current period primarily reflect engineering and development of the Gas Power Product and Project Permian Phase I, whereas the prior-year period primarily reflected work on and testing of specific aspects of our technology at the La Porte Demonstration Facility. R&D expenses decreased by $22.4 million, or 84%, for the three months ended June 30, 2026, as compared to the same period in 2025. This decrease was primarily due to the Company suspending development activities under the BHES JDA in December 2025 resulting in a decrease of $20.3 million. Additionally, plant expenses were lower by $3.0 million due to the suspension of R&D at the La Porte Demonstration Facility in December 2025. This decrease was offset by higher engineering consulting costs of $0.8 million, primarily related to the development of the Gas Power Product. In June 2026, a shareholder that operates the La Porte Demonstration Facility notified us that it is terminating all outstanding work orders under its services agreement with us, effective December 26, 2026. Project development Project development expenses consist of labor expenses and fees paid to third parties developing commercial scale projects. Project development expenses decreased by $26.1 million, or 96%, for the three months ended June 30, 2026, as compared to the same period in 2025. The decrease was due to the Company ceasing development work and related expenditures for our first utility-scale power plant utilizing the Oxy-Combustion Cycle (“SN1”), during the fourth quarter of 2025, while continuing development of Project Permian Phase I. This decrease was partially offset by current-period costs related to Project Permian Phase I under the Gas Power Product strategy. For the three months ended June 30, 2025, the Company incurred $19.5 million under the BHESLimited Notice to Proceed (“LNTP”) related to certain milestones and $7.3 million of costs related to the development of SN1. Impairment and other charges During the second quarter of 2026, the Company determined that triggering events had occurred requiring an impairment assessment of its Developed Technology Asset Group as a result of the indefinite suspension of activities under the BHES JDA and related agreements between the Company and Baker Hughes, together with the Company’s plans to not continue development of the Oxy-Combustion Cycle technology. As previously disclosed in our Form 10-Q for the quarter ended March 31, 2026, the outcome of the negotiations with Baker Hughes could adversely affect the recoverability of the carrying value of the Developed Technology Asset Group. Additionally, the Company does not have any plans to continue development of the Oxy-Combustion Cycle technology; accordingly, any recovery of the carrying value would be contingent upon a sale of all or part of the Oxy-Combustion Cycle intellectual property and the Company’s improvements, equipment and lease interests at the La Porte Demonstration Facility. As a result, the Company recognized an impairment of $193.7 million for the three months ended June 30, 2026. Depreciation, amortization, and accretion Depreciation, amortization and accretion expenses consist primarily of depreciation on our La Porte Demonstration Facility and amortization of intangible assets. Depreciation, amortization and accretion expense decreased by $18.2 million, or 84%, for the three months ended June 30, 2026, as compared to the same period in 2025, primarily due to lower depreciation and amortization rates as a result of the long-lived assets impairment recognized during the third quarter of 2025. Interest income, net Interest income decreased by $2.5 million, or 46%, for the three months ended June 30, 2026, as compared to the same period in 2025. Interest income decreased due to lower interest-bearing cash and investment balances, partially offset by higher investment accretion. 28 Table of Contents Change in Earnout Shares liability and Warrant liability The Change in Earnout Shares liability and Warrant liability relates to movements in fair value of earnout shares and warrants. The changes are primarily due to fluctuations in the market price of our Class A Common Stock and related volatility. Additionally, restrictions on transferability of the Earnout Shares expired during the second quarter of 2026. Income tax (expense) benefit The Company recognized income tax expense of less than $0.1 million for the three months ended June 30, 2026, compared to an income tax benefit of $1.6 million for the same period in 2025. During the first quarter of 2025, the Company moved out of a deferred tax liability and into an overall deferred tax asset position due to non-deductible book impairments. This deferred tax asset was offset by a valuation allowance. For the three months ended June 30, 2026, the Company has maintained the deferred tax asset position which was fully offset by a valuation allowance. Net loss attributable to non-controlling interests Net loss attributable to non-controlling interest was 60.6% of net loss before income tax for the three months ended June 30, 2026, as compared to 64.4% of net loss for the same period in 2025. The change in the non-controlling interests was due to exchanges by OpCo members of Class A OpCo Units for shares of Class A Common Stock, partially offset by the effect of Class A OpCo Units previously issued under the BHES JDA. 29 Table of Contents Results of Operations Comparison of the Six Months Ended June 30, 2026 to the Six Months Ended June 30, 2025 The following table sets forth our condensed consolidated results of operations data for the periods presented: Six Months Ended June 30, $ in thousands 2026 2025 $ Change % Change Operating expenses General and administrative 15,305 22,270 (6,965) (31) % Sales and marketing 2,204 2,679 (475) (18) % Research and development 23,921 49,218 (25,297) (51) % Project development 2,130 31,687 (29,557) (93) % Impairment and other charges 193,708 415,897 (222,189) (53) % Depreciation, amortization, and accretion 6,866 43,356 (36,490) (84) % Total operating expenses 244,134 565,107 Operating loss (244,134) (565,107) Other income Interest income, net 6,307 11,345 (5,038) (44) % Change in Earnout Shares liability and Warrant liability 5,080 75,580 (70,500) (93) % Change in Tax Receivable Agreement liability — 21,317 (21,317) (100) % Other income 8 6 2 33 % Net other income 11,395 108,248 Net loss before income tax (232,739) (456,859) Income tax (expense) benefit (2) 1,226 (1,228) (100) % Net loss after income tax (232,741) (455,633) Net loss attributable to non-controlling interests (142,593) (308,141) Net loss attributable to NET Power Inc. $ (90,148) $ (147,492) General and administrative General and administrative expenses decreased by $7.0 million, or 31%, for the six months ended June 30, 2026, as compared to amounts for the six months ended June 30, 2025. This decrease was primarily related to lower overall compensation expense due to a reduction in employee headcount. During the six months ended June 30, 2026, the Company terminated certain employees resulting in severance costs of $2.2 million and accelerated stock-based compensation of $0.9 million. During the second quarter of 2025, the Company terminated certain executive management resulting in $3.1 million in severance payments to these employees, as well as $1.1 million of stock-based compensation for related vesting accelerations. Additionally, professional fees decreased by $2.2 million, primarily for engineering consulting costs and legal services. Sales and marketing Sales and marketing expenses consist primarily of personnel-related costs and consultant costs directly associated with our sales and marketing activities, which include general publicity efforts for the Company. Sales and marketing expenses decreased by $0.5 million, or 18%, for the six months ended June 30, 2026, as compared to the six months ended June 30, 2025. This decrease was primarily attributable to lower employee headcount and professional fees. Research and development R&D expenses in the current period primarily reflect engineering and development of the Gas Power Product and Project Permian Phase I, whereas the prior period primarily reflected work and testing of specific aspects of 30 Table of Contents our technology at the La Porte Demonstration Facility. R&D expenses decreased by $25.3 million, or 51%, for the six months ended June 30, 2026, as compared to the six months ended June 30, 2025. This decrease was primarily due to the Company suspending the development activities under the BHES JDA in December 2025 resulting in a decrease of $25.1 million. Additionally, plant expenses were lower by $5.0 million due to the suspension of R&D at the La Porte Demonstration Facility in December 2025. This decrease was offset by higher engineering consulting costs of $3.0 million, primarily related to the development of the Gas Power Product, as well as employee termination costs including $0.9 million of severance costs and $0.3 million of accelerated stock-based compensation. In June 2026, a shareholder that operates the La Porte Demonstration Facility notified us that it is terminating all outstanding work orders under its services agreement with us, effective December 26, 2026. Project development Project development expenses consist of labor expenses and fees paid to third parties developing commercial scale projects. Project development expenses decreased by $29.6 million, or 93%, for the six months ended June 30, 2026, as compared to the six months ended June 30, 2025. This decrease was due to the Company ceasing development work and related expenditures for SN1 during the fourth quarter of 2025, partially offset by current-period costs related to Project Permian Phase I under the Gas Power Product strategy. For the six months ended June 30, 2026, the Company incurred $0.4 million of costs related to Project Permian Phase I. For the six months ended June 30, 2025, the Company incurred $19.5 million under the BHES LNTP related to certain milestones and $11.1 million of costs related to SN1. Impairment and other charges During the second quarter of 2026, the Company determined that triggering events had occurred requiring an impairment assessment of its Developed Technology Asset Group as a result of the indefinite suspension of activities under the BHES JDA and related agreements between the Company and Baker Hughes, together with the Company’s plans to not continue development of the Oxy-Combustion Cycle technology. As previously disclosed in our Form 10-Q for the quarter ended March 31, 2026, the outcome of the negotiations with Baker Hughes could adversely affect the recoverability of the carrying value of the Developed Technology Asset Group. Additionally, the Company does not have any plans to continue development of the Oxy-Combustion Cycle technology; accordingly, any recovery of the carrying value would be contingent upon a sale of all or part of the Oxy-Combustion Cycle intellectual property and the La Porte Demonstration Facility. As a result, the Company recognized an impairment of $193.7 million for the six months ended June 30, 2026. During the first quarter of 2025, the Company assessed its goodwill for impairment due to a change in the Company’s business plan and related sustained decrease in the Company’s market capitalization. As a result, the Company fully impaired goodwill for a loss of $359.8 million. Also in the first quarter of 2025, the Company expensed $56.1 million of costs associated with the construction of SN1 as management initiated a value engineering process to assess the project’s feasibility and optimize its design and temporarily paused further long-lead equipment releases. Depreciation, amortization, and accretion Our depreciation, amortization, and accretion expenses consist primarily of depreciation on our La Porte Demonstration Facility and amortization of intangible assets. Depreciation, amortization, and accretion expense decreased by $36.5 million, or 84%, for the six months ended June 30, 2026, as compared to amounts for the same period in 2025, primarily due to lower depreciation and amortization rates as a result of the long-lived asset impairment during the third quarter of 2025. Interest income, net Interest income decreased by $5.0 million, or 44%, for the six months ended June 30, 2026, as compared to amounts for the same period in 2025. This decrease was due to lower interest-bearing cash and investment balances, partially offset by higher investment accretion. 31 Table of Contents Change in Earnout Shares liability and Warrant liability The Change in Earnout Shares liability and Warrant liability relates to movements in fair value of earnout shares and warrants. The changes are primarily due to fluctuations in the market price of our Class A Common Stock and related volatility. Additionally, restrictions on transferability of the Earnout Shares expired during the second quarter of 2026. Change in Tax Receivable Agreement liability In March 2025, the Company reduced the Tax Receivable Agreement (“TRA”) liability of $21.3 million to zero as payments related to the TRA were not considered probable. In May 2025, pursuant to its rights under the TRA, the Company delivered to the agent of the TRA holders notice of the Company’s intent to terminate the TRA (the “Early Termination Notice”). No early termination payment was payable to any TRA holder. The Early Termination Notice became final and binding on June 12, 2025. Income tax (expense) benefit The Company recognized income tax expense of less than $0.1 million for the six months ended June 30, 2026, compared to an income tax benefit of $1.2 million for the same period in 2025. During the period ended June 30, 2025, the Company moved out of a deferred tax liability and into an overall deferred tax asset position due to non-deductible book impairments. This deferred tax asset was offset by a valuation allowance. For the period ended June 30, 2026, the Company has maintained the deferred tax asset position which was fully offset by a valuation allowance. Net loss attributable to non-controlling interests Net loss attributable to non-controlling interest was 61.2% of net loss before income tax for the six months ended June 30, 2026, as compared to 64.4% of net loss for the six months ended June 30, 2025. The change in the non-controlling interests was due to exchanges by OpCo members of Class A OpCo Units for shares of Class A Common Stock, partially offset by the additional issuance of Class A OpCo Units under the BHES JDA. Liquidity and Capital Resources Our principal sources of liquidity are cash and investments in highly liquid available-for-sale securities. Historically, our sources of liquidity have also included raising capital through the sale of equity. We may issue additional equity securities in the future, although our ability to raise capital through equity issuances on favorable terms is influenced by the market price of our Class A Common Stock, and, for so long as the aggregate market value of our common equity held by non-affiliates is below $75 million as of the applicable measurement dates, by limitations on primary offerings under our shelf registration statement, as described in Part II, Item 1A, and any future equity issuances at or near recent price levels would result in significant dilution to our existing stockholders. We measure liquidity in terms of our ability to fund the cash requirements of our R&D activities and our near-term business operations, including our contractual obligations and other commitments. Our current liquidity needs primarily involve general and administrative costs and costs to develop and procure the equipment necessary for our projects. 32 Table of Contents The following table summarizes our liquidity position: June 30, December 31, in thousands 2026 2025 Cash and cash equivalents $ 117,933 $ 199,430 Available-for-sale securities 190,437 176,704 Total liquidity $ 308,370 $ 376,134 The available-for-sale securities are comprised of investment grade, fixed income securities. Additionally, our current liabilities were $17.6 million at June 30, 2026. We believe we have the ability to manage our operating costs such that our existing liquidity will be sufficient to fund our obligations for the next 12 months following the filing of this Report. That conclusion is based on our existing obligations and commitments as of the date hereof and assumes that we would not enter into the additional equipment and/or construction commitments that would be necessary in advance of or in connection with a binding power offtake agreement and FID, including the additional pre-FID equipment commitments described under "Commitments and Contractual Obligations — Equipment Commitments Under Consideration, which we believe it is reasonably likely we will seek to enter into during the next 12 months and which would require additional capital during that period. We do not have sufficient committed capital to fund any such obligations or commitments or the additional project-level capital requirements for Project Permian Phase I through commercial operation, and we would need to obtain project-level financing, additional equity, partner capital, or other financing sources. As of the date of this Report, no project-level financing, customer deposit or partner capital for Project Permian Phase I has been committed. There is no assurance that we will be able to obtain such financing on acceptable terms or at all. Beyond the next 12 months, our capital requirements will depend primarily on the pace and configuration of Project Permian Phase I and any subsequent phases, including commitments for gas turbines and other long-lead equipment, and we expect to fund those requirements through a combination of project-level financing, additional equity or equity-linked capital, partner capital, and cash on hand. Cash Flow Summary The following table shows our cash flows from operating activities, investing activities and financing activities for the periods presented: Six Months Ended June 30, in thousands 2026 2025 Net cash used in operating activities $ (60,739) $ (44,974) Net cash used in investing activities $ (21,846) $ (109) Net cash used in financing activities $ (133) $ (99) Operating Activities Cash used in operating activities increased $15.8 million for the six months ended June 30, 2026, as compared to the same period in 2025. Our net cash used in operating activities to date has historically consisted primarily of payroll, materials and supplies, facilities expense, and professional services related to R&D, including the BHES JDA, and general and administrative activities. This change was primarily due to payment of $26.1 million in contract cancellation costs resulting from the Company terminating the BHES LNTP during the fourth quarter of 2025, which was paid in the first quarter of 2026. In addition, the Company suspended the development activities under the BHES JDA and suspended testing at our La Porte Demonstration Facility. We expect our cash used in operating activities to increase significantly before we start to generate any material cash inflows from our operations. 33 Table of Contents Investing Activities During the six months ended June 30, 2026, net cash used in investing activities increased $21.7 million as compared to the same period in 2025. Cash used in investing activities for the six months ended June 30, 2026 primarily reflects the investments in available-for-sale securities, along with capital expenditures related to Project Permian Phase I. Cash used in investing activities for the six months ended June 30, 2025 primarily reflects the maturity of the Company’s certificate of deposit and the reinvestment of those funds into available-for-sale securities, along with capital expenditures related to the La Porte Demonstration Facility and SN1 during the period in which costs were capitalized. Financing Activities Our cash used in financing activities was materially consistent for the six months ended June 30, 2026, as compared to the same period in 2025. Cash used in financing activities consists of finance lease obligation payments, income tax payments on vested share-based compensation awards, and issuance of Class A Common Stock. Commitments and Contractual Obligations Asset Retirement Obligation We hold a lease for approximately 218,900 square feet of land under the La Porte Demonstration Facility. In addition, we have an oxygen supply agreement with the lessor to supply oxygen to the La Porte Demonstration Facility. The lease expires on the earlier of (i) January 1, 2031 and (ii) the termination of our oxygen supply agreement with the lessor. The term of the oxygen supply agreement expires on January 1, 2030 with automatic 12-month renewal terms. The oxygen supply agreement may be terminated by the lessor or by us upon 24 months’ written notice prior to the expiration date of its current term. The underlying lease requires the removal of all equipment and the obligation to restore the land to post-clearing grade level, which has resulted in the recognition of an asset retirement obligation liability of $4.5 million and $3.6 million as of June 30, 2026 and December 31, 2025, respectively. As discussed in Note 14, during the second quarter of 2026 we revised the expected decommissioning timing for the La Porte Demonstration Facility to June 2027, based on the Company’s expectations regarding the continued ownership of its Oxy-Combustion Cycle technology assets. Leases The Company leases corporate office space in Durham, North Carolina, and Houston, Texas. The Company also leases land in West Texas for Project Permian from a subsidiary of Occidental Petroleum, which is a significant shareholder of the Company. Additionally, the Company leases two office trailers at the La Porte Demonstration Facility, as well as a warehouse, in La Porte, Texas. As of June 30, 2026, future minimum lease payments attributable to the Company’s operating lease arrangements are approximately $3.9 million. Off-Balance Sheet Arrangements As of June 30, 2026 and December 31, 2025, we had not engaged in any off-balance sheet arrangements, as defined in the rules and regulations of the SEC. Purchase Commitments As of June 30, 2026, we have committed to purchase certain components of industrial machinery, primarily for use at Project Permian Phase I. The gross commitments totaled $79.6 million. As of June 30, 2026, there was $55.8 million remaining related to these commitments. These payments are due in installments aligned to contractual milestones through 2028. Of the remaining amount related to Project Permian Phase I, 34 Table of Contents approximately $8.9 million is due during the 12 months following June 30, 2026 and approximately $46.6 million is due thereafter through 2028. We expect to fund the amounts due during the next 12 months from existing liquidity. No project-level financing is committed for the later amounts. These amounts exclude any additional pre-FID equipment commitments described in the following paragraph. Equipment Commitments Under Consideration We are also evaluating whether to enter into additional commitments for power generation equipment and related long-lead items in advance of executing a binding power offtake agreement and reaching FID. We have not entered into any such commitment as of the date of this Report, and we do not have committed customer deposits, partner capital or financing for any such commitment. Based on prospective customer requirements in our offtake process, we believe it is reasonably likely that we will seek to enter into one or more such commitments during the next 12 months, a portion of which would become payable during the next 12 months. If we enter into such commitments and Project Permian Phase I does not reach FID, we may be unable to recover all of our cost through resale or redeployment of the equipment. Critical Accounting Policies and Estimates Our financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. (“US GAAP”). Preparation of the financial statements requires our management to make a number of judgments, estimates and assumptions relating to the reported amounts of expenses, assets, and liabilities and the disclosure of contingent assets and liabilities. We consider an accounting judgment, estimate or assumption to be critical when (1) the estimate or assumption is complex in nature or requires a high degree of judgment and (2) the use of different judgments, estimates, and assumptions could have a material impact on our financial statements. Our significant accounting policies are described in Note 2 — Significant Accounting Policies in our consolidated financial statements included in Part II, Item 8 in our Annual Report. Emerging Growth Company Accounting Election Section 102(b)(1) of the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) exempts emerging growth companies (“EGCs”) from being required to comply with new or revised financial accounting standards until private companies are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect not to take advantage of the extended transition period and comply with the requirements that apply to non-EGCs, and any such election to not take advantage of the extended transition period is irrevocable. We expect to be an EGC until December 31, 2026, which is the last day of the fiscal year following the fifth anniversary of our initial public offering. As an EGC, we intend to continue to take advantage of the benefits of this extended transition period.

Legal Proceedings

From time to time, the Company is party to certain legal actions and claims. Other than any such ordinary routine litigation incidental to the business and except as described below, we are not currently a party to, nor is our property currently subject to, any material legal proceedings, and we are not aware of any such proceedings contemplated by governmental authorities. On April 18, 2025, an alleged stockholder, individually and on behalf of all others similarly situated, filed a putative class action complaint for violation of federal securities laws against us, our Chief Executive Officer, President and Interim Chief Financial Officer, our former Chief Financial Officer and our former President and Chief Operating Officer (collectively, the “Defendants”) in the United States District Court for the Middle District of North Carolina (the “Complaint”). The Complaint purports to bring a federal securities class action on behalf of a class of persons and entities other than the Defendants who acquired our securities between June 9, 2023 and March 7, 2025 and asserts violations of Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 promulgated thereunder. On April 23, 2026, the Court appointed a lead plaintiff (the “Plaintiff”) to represent the putative class and the Plaintiff filed an amended complaint with the Court on June 22, 2026 (the “Amended Complaint”). The Amended Complaint alleges, among other things, that the Defendants made materially false and misleading statements related to our business, operations and prospects, including the timing and costs of developing Project Permian. The Plaintiff seeks, among other things, certification of a class, an award of unspecified compensatory damages, interest, costs and expenses, including attorneys’ fees and expert fees. On August 6, 2026, the Company filed a motion to dismiss the Amended Complaint. As of the date of this Report, the motion has not been decided by the Court. On May 29, 2025, an alleged stockholder of the Company filed a derivative suit on behalf of the Company against our Chief Executive Officer, President and Interim Chief Financial Officer, our former Chief Financial Officer, our former President and Chief Operating Officer and our board of directors in the United States District Court for the Middle District of North Carolina, asserting claims for breach of fiduciary duty, unjust enrichment, abuse of control, gross mismanagement, waste of corporate assets, and violations of federal securities laws (the “Derivative Complaint”). These claims are predicated on the same allegedly false and misleading statements regarding the time and capital needed to complete Project Permian that are the subject of the Amended Complaint outlined above. The Derivative Complaint has been stayed pending the resolution of the Amended Complaint. We intend to vigorously defend against the claims brought in both matters. These matters are at an early stage. A lead plaintiff was appointed on April 23, 2026 and filed the Amended Complaint on June 22, 2026. As of the date of this Report, the Company's motion to dismiss the Amended Complaint is pending and has not been decided, discovery has not commenced, and no class has been certified. The Plaintiff has not specified an amount of alleged damages, and the Derivative Complaint has been stayed pending resolution of the Amended Complaint. For these reasons, and given the inherent uncertainty of litigation, we are unable to estimate a reasonably possible loss or range of loss, if any, that we may incur to resolve or settle these matters. Please refer to Note 14 — Commitments and Contingencies for additional information regarding these claims.

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Risk Factors

As a smaller reporting company, we are not required to provide the information called for by this Item. We are nonetheless providing the risk factors set forth below, which reflect risks associated with recent developments in our business and strategy. These risk factors supplement and, to the extent inconsistent, supersede the risk factors disclosed in Part I, Item 1A of our Annual Report, which you should also carefully consider. The risk factors below are not a complete statement of the risks we face. We may be unable to negotiate and enter into binding power offtake agreements on acceptable terms, on our anticipated timeline, or at all, which would adversely affect our ability to reach a final investment decision 37 Table of Contents and obtain project financing for Project Permian Phase I. We are engaged in a process intended to result in one or more power offtake agreements for Project Permian Phase I. Discussions, indications of interest, requests for proposals, term sheets, memoranda of understanding and similar instruments do not constitute binding commitments unless and until definitive agreements are executed. If we are unable to execute binding power offtake agreements at prices and on terms sufficient to support project economics and financing, our final investment decision, construction commencement, and commercial operation dates could be delayed or may not occur, and our liquidity and capital requirements would be adversely affected. We also expect that any power offtake agreement we enter into would require us to provide substantial reciprocal credit support, in the form of cash, letters of credit or guarantees, scaled to the capacity committed and maintained through development, construction and operations, which would further reduce the liquidity available to us for other purposes. Demand for the power we intend to sell is concentrated in a limited category of large-load customers whose electricity requirements depend on capital investment cycles that may not continue at current levels. Our offtake process for Project Permian Phase I is directed primarily at data center developers, computing infrastructure providers and other large-load customers whose electricity requirements reflect sustained capital investment in computing capacity. That investment is concentrated among a limited number of counterparties and is discretionary. A reduction, deferral or geographic reallocation of capital spending by these counterparties (whether resulting from changes in expected returns on computing investment, financing conditions, technological developments that reduce power intensity per unit of computing output, siting, permitting or community opposition constraints, regulatory or governmental restrictions on the development or interconnection of data centers, including in ERCOT, or general economic conditions) could reduce the number of potential offtakers, extend negotiation timelines, or reduce the pricing, contract tenor or capacity commitments available to us. Because we expect to rely on long-term offtake agreements to support project-level financing, the concentration, contract tenor and creditworthiness of our counterparties will also affect our ability to obtain financing on acceptable terms. We may be unable to identify alternative customers for capacity developed in reliance on this demand. Our business strategy has changed substantially, and our project configurations may include natural gas generation deployed in advance of, or without, carbon capture. We have repositioned our business to focus on natural gas power generation for co-located large-load customers, initially without carbon capture, and we have indefinitely suspended development of the Oxy-Combustion Cycle. We do not currently expect the initial phase of Project Permian to include carbon capture, and any later deployment of carbon capture would depend on definitive technology, customer and financing arrangements. This repositioning reflects, among other things, current market conditions in which many prospective customers prioritize the speed and quantity of reliable power over carbon abatement and may be unwilling to pay a premium for lower-carbon power in the near term. The configuration, capacity and carbon capture scope of each phase of our projects, including Project Permian Phase I, will depend on our ability to in-license any necessary post-combustion carbon capture technology, customer requirements, commercial arrangements, equipment availability and financing, and may include natural gas generation deployed in advance of, or without, carbon capture. Our ability to deploy carbon capture technology at our projects is dependent on our ability to negotiate and enter into definitive commercial arrangements to license post-combustion carbon capture technology from Entropy or another provider. If we are unable to reach such definitive agreements, we may be unable to offer carbon capture at our projects, which would materially and adversely affect our business prospects. We may be unable to realize any value from our Oxy-Combustion Cycle intellectual property and the La Porte Demonstration Facility, which have been fully impaired. During the second quarter of 2026, we recognized a full impairment of the Developed Technology Asset Group, and those assets are carried at no value. We have no current plans to resume development of the Oxy- 38 Table of Contents Combustion Cycle, and any recovery of value would depend on a sale or other disposition of all or part of the Oxy-Combustion Cycle intellectual property and our improvements, equipment, and lease interests at the La Porte Demonstration Facility. We have not entered into any binding agreement for such a transaction, Baker Hughes' exclusive rights with respect to the La Porte Demonstration Facility remain in effect and may limit the terms or universe of potential counterparties, and there can be no assurance that any transaction will be agreed or consummated, or as to its terms or timing. In addition, we have revised the expected decommissioning timing for the La Porte Demonstration Facility to June 2027, and the actual timing and cost of decommissioning, or the treatment of those obligations in any disposition, may differ from our current estimates. Our pursuit of co-located large-load projects exposes us to execution risks that are new to us and to governmental intervention in Texas, any of which may delay, restrict, or prevent our projects. We are pursuing the development of power generation projects for co-located large-load facilities such as data centers. Activities of this type are new to us and may expose us to risks we have not previously borne including land acquisition and site-control risk, construction and counterparty risk, contractual performance risk, regulatory risk, and additional capital requirements at a time when we do not have sufficient committed capital to fund Project Permian Phase I through commercial operation. If a co-located facility requires grid-supplied power, whether as a supplement or as backup, we or our customer would be subject to large-load interconnection processes and to competition for available capacity, either of which could delay the project. We may also face competition for sites, interconnection positions, and end users from parties with substantially greater resources and relevant experience. We currently hold only a portion of the land rights required for the contemplated co-located configuration and broader build-out at Project Permian, and we have not obtained the additional land or development rights that configuration would require. If we do not obtain those rights on acceptable terms, Project Permian may be limited in size, delayed, reconfigured or not developed. To preserve schedule, we may also commit material capital to power generation equipment and related engineering before binding offtake, land, partner and project-financing arrangements are in place, and if a project does not proceed, a portion of those expenditures may not be recoverable. If these activities are unsuccessful, we could incur costs without corresponding benefit, and our results of operations, liquidity, and project timelines could be materially and adversely affected. These processes are also subject to intervention by Texas state officials. On August 3, 2026, the Governor of Texas directed the Public Utility Commission of Texas and ERCOT to conduct a comprehensive verification and audit of all data center projects advancing through ERCOT’s interconnection process before any additional data center projects are approved to move forward, and directed that any project failing to comply with applicable requirements be denied connection to the Texas grid. The directive requires the collection of information from each data center project regarding public financial assistance received or expected, projected electricity consumption and any on-site generation, projected water consumption and cooling technology, measures to mitigate impacts on neighboring communities, and project ownership and control. The Governor has also indicated that he intends to work with the Texas legislature to address concerns regarding data centers. We cannot predict the scope, duration, or outcome of this process, the requirements the Public Utility Commission of Texas or ERCOT may adopt in response, or any resulting legislation. The process may delay or prevent the interconnection of data centers and other large loads that we expect to serve, extend the timelines on which prospective customers are prepared to commit to power offtake, alter the criteria on which customers select sites, or reduce the number of prospective customers able to proceed in ERCOT. Any of these outcomes could delay or prevent our reaching a final investment decision for Project Permian Phase I, delay or prevent project-level financing, and adversely affect our business, financial condition, results of operations, and prospects. Grid interconnection and related regulatory processes, including ERCOT’s recently adopted batch framework for interconnecting large loads, may delay or restrict our projects. Our projects may require timely interconnection to the ERCOT grid and, for behind-the-meter configurations, may depend on the large-load interconnection processes applicable to co-located loads, whether those loads are 39 Table of Contents developed, owned, or contracted for by our customers, our partners, or us. These processes are new, evolving, and subject to eligibility criteria, timelines, financial-security requirements, and allocation decisions outside of our control. Delays or adverse outcomes could delay project development, increase project costs, reduce the attractiveness of our projects to customers, and adversely affect our results. We depend on the availability, cost and delivery timing of power generation equipment and related long-lead equipment. Manufacturer backlogs for power generation equipment, including gas turbines, and related equipment currently extend multiple years. Although we have contracted for certain turbine equipment for Project Permian Phase I, changes in delivery schedules, cost escalation, supplier performance or the loss of reserved manufacturing slots could delay our projects and increase their cost, and replacement equipment may not be available on acceptable terms or timelines, or at all. Prevailing market prices for equipment comparable to the units we have contracted have increased materially since we contracted for them, and any additional equipment we procure is likely to cost more than the equipment we hold. We do not have a binding agreement for the post-combustion carbon capture technology, which is an important pillar of our long-term strategy. Our prior letter of intent with Entropy has expired by its terms and has not been replaced, and our discussions with Entropy are continuing on a non-binding basis. Either party may discontinue negotiations at any time, and any framework we agree is not expected to provide for exclusivity or an equity investment by us in Entropy. We have not agreed on the structure, scope, economics or timing of any definitive arrangement, and any definitive arrangement may require capital commitments, licensing fees or other payments in amounts and on timing that have not been determined. If we are unable to enter into definitive agreements on commercially acceptable terms, we would need to identify and qualify an alternative technology provider, which would require additional time and expense, may not be available on terms or timelines supporting our project schedules, and could prevent or delay carbon capture in later phases. Our project economics depend in part on carbon capture tax credits, which are subject to availability, transferability, monetization and other restrictions. The economics of projects incorporating carbon capture depend in part on federal tax credits, including the credit under Section 45Q of the Internal Revenue Code, the value, transferability and monetization of which are subject to statutory and regulatory requirements, including restrictions relating to foreign entities of concern. The credit value available with respect to any project will depend on, among other things, when the applicable facility or equipment is placed in service, whether prevailing wage and apprenticeship requirements are satisfied, and the manner in which captured CO₂ is stored, used, or otherwise disposed of, and legislation enacted in 2025 that increased certain credit values, including for CO₂ used in enhanced oil recovery, may be amended or repealed. If such credits are unavailable, reduced, restricted or cannot be efficiently monetized, our project economics and offtake pricing could be adversely affected. Customers may not attribute value to carbon capture, and regulatory developments may reduce requirements that would otherwise support demand for lower-carbon generation. Our long-term strategy contemplates that some customers may eventually value, and pay for, power generated with carbon capture. Our near-term strategy does not assume that customers will pay a premium for lower-carbon power, and the initial phase of Project Permian is not currently expected to include carbon capture. Recent development activity in our target markets has emphasized speed to power, available capacity and price, and certain large purchasers of electricity have modified or extended timelines associated with previously announced emissions commitments. In addition, federal greenhouse gas emission standards applicable to fossil fuel-fired electric generating units, and related greenhouse gas reporting requirements, are subject to pending regulatory action. If applicable emissions requirements are reduced or eliminated and customers do not independently attribute value to carbon capture, pricing available for lower-carbon power may not exceed 40 Table of Contents pricing for conventional generation by an amount sufficient to recover the incremental capital and operating costs of carbon capture. In that event, we may deploy generation without carbon capture, defer carbon capture investment, or realize returns below those we currently anticipate. We compete for customers, equipment and capital with substantially larger and better-capitalized participants, including participants pursuing gas generation with carbon capture. Following the repositioning of our business, we compete directly with integrated energy companies, independent power producers, equipment manufacturers and developers pursuing natural gas generation for large-load customers, including projects incorporating carbon capture. Many of these participants have greater financial resources, lower costs of capital, established customer relationships, existing carbon dioxide transportation and sequestration infrastructure, priority access to constrained equipment manufacturing capacity, and the ability to commit capital in advance of securing offtake. We may be unable to compete successfully on schedule, price or credit terms. We may be unable to obtain the capital required to develop our projects, and our share price, public float, and changed asset base may limit our access to capital, result in substantial dilution, and affect the continued listing of our securities. Following the impairment of the Developed Technology Asset Group, our assets consist primarily of cash, cash equivalents and investments, and deposits on gas turbine equipment for Project Permian Phase I. We have no revenue, no binding power offtake agreement, and have not made a final investment decision for Project Permian Phase I, and we do not have sufficient committed capital to fund the project through commercial operation. Our ability to raise equity capital depends on the market price of our Class A Common Stock and on the aggregate market value of our common equity held by non-affiliates. If and for so long as that value is below $75 million as of the applicable measurement dates under the instructions to Form S-3, the amount of securities we may sell in primary offerings under an effective shelf registration statement during any 12-month period is limited to a portion of that value. A decline in the market price of our Class A Common Stock would further reduce the capital available to us through such offerings, increase the dilution to existing stockholders resulting from any equity issuance, and could make equity financing unavailable on acceptable terms or at all. In addition, share-settled payments under the BHES JDA made when the ten-day volume-weighted average price of our Class A Common Stock is below $4.00 per share require incremental cash payments, as described in Note 12. Our Class A Common Stock and warrants are listed on the New York Stock Exchange and are subject to its continued listing standards, including a requirement that the average closing price of a listed security not fall below $1.00 over a consecutive 30 trading-day period. The market price of our Class A Common Stock has been volatile. If we fail to satisfy applicable continued listing standards and do not cure the deficiency within the applicable period, our securities could be suspended from trading and delisted, which would further impair our access to capital and reduce the liquidity of our securities. We are subject to the risk of becoming an investment company. We are an energy technology and project development company. We are not primarily engaged in the business of investing, reinvesting or trading in securities, and we do not hold ourselves out as being engaged in those activities; our historical development, our public representations and the activities of our officers and directors support the conclusion that we are an operating company. Under the Investment Company Act of 1940, as amended (the “ICA”), however, a company may be deemed an investment company if the value of its investment securities exceeds 40% of its total assets (excluding government securities and cash items) and no exception or safe harbor applies. Pending its use in our primary business, we invest cash, including cash obtained in connection with our 2023 merger, in highly liquid available-for-sale securities, including corporate bonds, to conserve capital and liquidity, and as a result of recently recognized impairment losses those securities constitute a larger portion of our total assets than previously. To maintain compliance with the ICA, we monitor 41 Table of Contents the value of our investments, and we may need to divest securities, make investments that are less advantageous than if we did not have ICA concerns, or forgo otherwise desirable investments or transactions. Rule 3a-2 under the ICA provides a one-year grace period for a transient investment company that has a bona fide intent to be engaged primarily in a non-investment business, but the grace period is available no more than once every three years and may not be available when we seek to rely on it, and reliance on it could require us to dispose of securities or limit our investments, joint ventures or other activities. We intend to conduct our business so that we are not deemed an investment company, but there can be no assurance that we will succeed. If we were deemed an investment company, we would be required to register under the ICA, obtain exemptive relief, or modify our business and organizational structure to fall outside the definition. Registration would subject us to substantial regulation concerning management, operations, transactions with affiliates and portfolio composition, which would significantly affect our ability to operate as contemplated and could have a material adverse effect on our business, financial condition and results of operations. If we failed to register when required, we could be subject to monetary penalties or injunctive relief in an action brought by the SEC, and we could be unable to enforce contracts with third parties. We are subject to a pending securities class action and a related stockholder derivative action, and may become subject to additional litigation or regulatory proceedings, any of which could result in substantial costs and divert management’s attention. We are a defendant in a putative federal securities class action and a related stockholder derivative action, in each case arising from alleged misstatements concerning the timing and costs of developing Project Permian. These matters are described in Part II, Item 1, “Legal Proceedings,” and in Note 14 to our condensed consolidated financial statements. We intend to defend these matters vigorously, but we cannot predict their outcome, and we are unable to estimate a reasonably possible loss or range of loss. Litigation of this type is expensive, may continue for years, and diverts the attention of management and other personnel from our business, regardless of outcome. An unfavorable ruling or a settlement could require us to pay substantial amounts, and our insurance may be insufficient, subject to significant retentions, or unavailable for some or all of these matters. We also have indemnification and expense-advancement obligations to our current and former officers and directors. The underlying events, these actions, or our disclosures regarding them could give rise to additional litigation or to inquiries or investigations by regulatory authorities. Additional risks and uncertainties not presently known to us, or that we currently deem immaterial, may also materially and adversely affect our business, financial condition, results of operations, and prospects.