Company: NC
Filing Date: 2025-03-05
Form Type: 10-K
Source: 0000789933-25-000006
Chunk: 79

Company: NACCO INDUSTRIES INC
Filing Date: 2025-03-05
Form: 10-K
Item: Item 1A
Chunk 79
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 commodity prices may reduce the amount of oil and natural gas that third-party operators can produce economically. In the event that new federal or state restrictions related to the hydraulic fracturing process are adopted in areas where we own mineral and royalty interests, our lessees may incur additional costs or permitting requirements to comply with such requirements that may be significant and could result in added restrictions, delays or curtailments in the pursuit of exploration, development, or production activities. In addition, if a lessee were to experience financial difficulty, the lessee might not be able to pay our royalty payments or continue operations. A failure on the part of the lessee to make royalty payments may give us the right to terminate the lease, repossess the property and enforce payment obligations under the lease. If we repossessed any of our properties, we would seek a replacement lessee. However, we may not be able to find a replacement lessee or  might not be able to enter into a new lease on favorable terms within a reasonable period of time. In addition, if we are able to enter into a new 

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lease with a new lessee, the replacement lessee may not achieve the same levels of production or sales prices as the lessee it replaced. Any of these risks could materially reduce our expected royalty income and  profitability.

Minerals are a depleting asset. Unless we replace existing mineral and royalty interests with new mineral and royalty interests and third-party lessees develop those mineral and royalty interests, our reserves and royalty income will decline.

Producing oil and natural gas reservoirs are generally characterized by declining production rates that vary depending upon reservoir characteristics and other factors. Unless our third-party lessees conduct successful ongoing well development activities or we continually acquire mineral and royalty interests, production and income related to our mineral and royalty interests will decline as those reserves are depleted. The future cash flow and results of operations of the Minerals Management segment are highly dependent on third-party operators’ success in developing our current and future mineral and royalty interests. These operators may not have access to the capital needed to develop our mineral interests. We may not be able to acquire or find sufficient additional mineral and royalty interests to replace third-party operators' current and future production. Further, the decline curve we use to project future royalty income is subject to numerous assumptions and limitations. Natural gas wells have high initial production rates and follow a natural decline before settling into relatively stable, long-term production. Decline rates can vary due to factors like well depth, well length, formation pressure