Climate Change Data

Environmental Metrics

Climate Goals & Targets

Environmental Challenges

• The Company has incurred net losses since entering the oil and gas exploration industry and as of May 31, 2014 has an accumulated deficit of $27,730,232 and a working capital deficit of $3,410,021 which raises substantial doubt about the Company’s ability to continue as a going concern.

Mitigation Strategies

• Daybreak currently has an average 36.8% working interest and 28.4% net revenue interest in 20 producing wells in its East Slopes Project located in Kern County, California. The revenue from these wells has created a steady and reliable source of revenue. Additionally, the Company has become involved in a shallow oil play in an existing gas field in Lawrence County, Kentucky, through its acquisition of an average 25% working interest in approximately 6,400 acres in two large contiguous blocks in the Twin Bottoms Field in Lawrence County, Kentucky. Daybreak plans to continue its development drilling programs in both California and Kentucky at a rate that is compatible with its cash flow and funding opportunities.

Supply Chain Management

Climate-Related Risks & Opportunities

Environmental Metrics

Climate Goals & Targets

Environmental Challenges

• Declining hydrocarbon prices since June 2014, significantly impacting cash flow.
• Inability to make interest or principal payments on credit facility with Maximilian Resources, LLC.
• High competition from larger companies with greater resources.
• Significant operating losses in the past.
• Substantial indebtedness.
• Potential for impairments of asset carrying values due to low hydrocarbon prices.
• Limited operating history.
• Potential elimination of certain U.S. federal income tax deductions.
• Extensive environmental regulations and potential liabilities from environmental contamination.
• Potential for increased operating costs and reduced demand due to climate change legislation.
• Potential for increased costs and restrictions related to hydraulic fracturing.
• Uncertainty in proved reserve estimates.
• High risk of drilling activities.
• Potential loss of key management personnel.
• Potential inability to continue as a going concern.
• Volatile market price of common stock.
• Common stock classified as a "penny stock".

Mitigation Strategies

• Pursuing oil and natural gas drilling opportunities through joint ventures.
• Utilizing modern technology (3-D seismic) to mitigate risk.
• Working with service providers to control drilling costs.
• Seeking to modify credit facility terms with Maximilian.
• Implementing plans to enhance ability to continue as a going concern (developing Kentucky and California projects).
• Reliance on external sources of financing (debt and equity markets or sale of assets).
• Maintaining insurance coverage for operations.
• Implementing an Ethical Business Conduct Policy Statement and a Code of Ethics for Senior Financial Officers.

Supply Chain Management

Climate-Related Risks & Opportunities

Physical Risks

• Hurricanes and other weather conditions

Transition Risks

• Climate change legislation
• Regulatory changes

Environmental Metrics

Climate Goals & Targets

Environmental Challenges

• Volatile crude oil and natural gas prices since June 2014.
• Substantial indebtedness.
• Need for significant capital expenditures for future projects.
• Highly competitive industry.
• Dependence on finding, acquiring, and developing economically recoverable crude oil and natural gas properties.
• Uncertainty in reserve estimates.
• Concentration of reserves in one geographic area.
• High risk associated with drilling.
• Risk of lease terminations.
• Increased anti-crude oil and natural gas development activity.
• Restricted land access.
• Potential for significant losses if adequate insurance is not maintained.
• Risk of obsolescence of current exploration and drilling methods.
• Potential elimination of certain U.S. federal income tax deductions.
• Extensive environmental regulations and potential liabilities.
• Climate change legislation or regulations.
• Potential loss of key management personnel.
• Risk of not being able to continue as a going concern.
• Volatile market price of common stock.
• Limited operating history.

Mitigation Strategies

• Pursuing crude oil and natural gas drilling opportunities through joint ventures.
• Utilizing modern technology, including 3-D seismic, to mitigate risk.
• Negotiating a more favorable crude oil pricing schedule (effective June 1, 2017).
• Settlement of debt obligations with Maximilian Resources LLC in December 2018.
• Controlling drilling costs through drilling efficiencies.
• Centralized production facility to reduce operating expenses.
• Implementing plans to enhance ability to continue as a going concern.
• Maintaining insurance coverage customary in the industry.

Supply Chain Management

Climate-Related Risks & Opportunities

Physical Risks

• Extreme weather conditions

Transition Risks

• Regulatory changes, market shifts

Environmental Metrics

Climate Goals & Targets

Environmental Challenges

• Substantial doubt about the Company’s ability to continue as a going concern due to net operating losses, accumulated deficit of $29.1 million, and working capital deficit of $4.0 million as of May 31, 2020.
• Adversely affected demand for crude oil, depressed crude oil prices, and affected ability to access capital due to the COVID-19 pandemic.
• Volatility and instability in hydrocarbon prices impacting the timing of drilling activity.

Mitigation Strategies

• Received funding of approximately $74,355 from the Paycheck Protection Program (PPP).
• Plans to increase revenue by participating in drilling more wells in the East Slopes Project in California and starting exploratory drilling in Michigan.
• Seeking additional funding from private or public debt or equity markets.

Supply Chain Management

Climate-Related Risks & Opportunities

Environmental Metrics

Climate Goals & Targets

Environmental Challenges

• Volatile energy prices (crude oil and natural gas), particularly the significant decline since June 2014.
• COVID-19 pandemic's negative impact on revenues and demand for crude oil.
• Limited capital expenditures and drilling program due to low hydrocarbon prices.
• Concentration of reserves in one geographic area (Kern County, California).
• Competition with larger companies with greater resources.
• Potential for title deficiencies in crude oil and natural gas leases.
• Risks associated with oilfield operations (blowouts, explosions, pollution).
• Potential obsolescence of current exploration and drilling methods due to new technologies.
• Increased anti-crude oil and natural gas development activity.
• Restricted land access.
• Extensive environmental regulations and potential liabilities.
• Climate change legislation and regulations restricting GHG emissions.
• Substantial indebtedness and operating losses.
• Potential elimination of certain U.S. federal income tax deductions.
• Loss of key management personnel.
• Potential for terrorist attacks or armed conflicts.
• Limited operating history.
• Resale of shares from private placements could depress share value.
• Dilution of ownership interests from issuance of additional shares.
• Lack of dividend payments.

Mitigation Strategies

• Pursuing crude oil and natural gas drilling opportunities through joint ventures.
• Utilizing modern technology (3-D seismic) to identify potential reservoirs and mitigate risk.
• Cost control through drilling efficiencies and working with service providers.
• Centralized production facility in California to reduce operating expenses.
• Debt settlement with Maximilian Resources LLC in December 2018.
• Maintaining various types of insurance to cover operations.
• Focus on retaining and developing existing employees.
• Seeking to raise additional funds through debt financing.
• Implementing a program to reduce G&A costs.
• Participation in the SBA Paycheck Protection Program (PPP).
• Forgiveness of deferred salary owed to the CEO and other employees.
• Reduction of base salaries for executive officers and key employees.

Supply Chain Management

Climate-Related Risks & Opportunities

Physical Risks

• Extreme weather conditions

Transition Risks

• Regulatory changes, market shifts

Environmental Metrics

Climate Goals & Targets

Environmental Challenges

• The Company has incurred net operating losses since entering the crude oil exploration industry and as of August 31, 2021 has an accumulated deficit of $29.6 million and a working capital deficit of $4.2 million which raises substantial doubt about the Company’s ability to continue as a going concern.
• The widespread health crisis and the governmental restrictions associated with COVID-19 have adversely affected demand for crude oil, depressed crude oil prices, and affected our ability to access capital.
• Volatility and decline in the price of crude oil has had a substantial negative impact on our cash flow from our producing California properties.

Mitigation Strategies

• The Company continues to implement plans to enhance its ability to continue as a going concern. This includes relying on revenue from existing wells, seeking additional funding from debt or equity markets, and selling assets.
• Participation in the Paycheck Protection Program (PPP).

Supply Chain Management

Climate-Related Risks & Opportunities

Environmental Metrics

Climate Goals & Targets

Environmental Challenges

• Volatile energy prices (crude oil and natural gas)
• Supply chain challenges
• Hydrocarbon price declines resulting in asset impairments
• Need for significant capital expenditures
• Highly competitive industry
• Dependence on successful exploration and acquisition
• Uncertainty in reserve estimates
• Inability to replace current production
• Reclassification of proved undeveloped reserves
• Concentration of reserves in one geographic area
• Uncertainty in geological and engineering estimates
• Shortages of oilfield equipment, services, and personnel
• High-risk drilling activity
• Risk of lease terminations or expirations
• Need for significant additional funds
• Title deficiencies
• Risk of significant losses due to inadequate insurance
• Obsolescence of current exploration and drilling methods
• Increased anti-crude oil and natural gas development activity
• Restricted land access
• Extensive environmental regulations and potential liabilities
• Climate change legislation and regulations
• Significant operating losses
• Substantial indebtedness
• Potential elimination of tax deductions
• Loss of key management personnel
• Risk of terrorist attacks or armed conflict
• Volatile market price of common stock
• Limited operating history
• Potential for share dilution
• Lack of dividend payments

Mitigation Strategies

• Pursuing crude oil and natural gas drilling opportunities through joint ventures
• Utilizing modern technology (3-D seismic)
• Controlling drilling costs through drilling efficiencies
• Seeking projects that offer a mix of low risk with steady revenue and higher risk with larger return
• Restructuring balance sheet by converting related party debt to common stock
• Implementing plans to enhance Daybreak’s ability to continue as a going concern (including acquisition of Reabold)
• Maintaining insurance coverage customary in the industry
• Working to reduce G&A costs
• Implementing plans to improve cash flow

Supply Chain Management

Climate-Related Risks & Opportunities

Physical Risks

• Extreme weather conditions

Transition Risks

• Regulatory changes, market shifts