In accordance with the requirements of the U.S. Securities and Exchange Commission (the “SEC”) and any applicable securities exchange, the board of managers (the “Board”) of Phoenix Equity Holdings, LLC (together with its subsidiaries, including Phoenix Energy One, LLC (“Phoenix Energy”), collectively, the “Company”) has adopted this Code of Ethics and Conduct (this “Code”) to encourage:
All managers, officers, and employees of the Company and all of its subsidiaries and controlled affiliates (each a “Covered Party” and, collectively, the “Covered Parties”) are expected to be familiar with this Code and to adhere to those principles and procedures set forth below. Covered Parties must conduct themselves accordingly, exhibiting the highest standard of business and professional integrity, and seek to avoid even the appearance of improper behavior. This Code supplements and amends the policies of Phoenix Energy set forth in the employee handbook, as amended (the “Handbook”), that has been adopted by Phoenix Energy. In the event of any conflict between the terms of this Code and the Handbook, the terms and provisions of the Handbook shall control.
A conflict of interest occurs when the private interests of a Covered Party interfere, or appear to interfere, with the interests of the Company as a whole.
For example, a conflict of interest can arise when a Covered Party takes actions or has personal interests that may make it difficult to perform his or her Company duties objectively andUS-DOCS\159780757.1 effectively. A conflict of interest may also arise when a Covered Party, or a member of his or her immediate family,¹ receives improper personal benefits as a result of his or her position at the Company.
Conflicts of interest can also occur indirectly. For example, a conflict of interest may arise when a Covered Party is also an executive officer or a major equityholder, or has a material interest in a company or organization doing business with the Company.
Each Covered Party has an obligation to conduct the Company’s business in an honest and ethical manner, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships. Any situation that involves, or may reasonably be expected to involve, a conflict of interest with the Company should be disclosed promptly to the Company’s Chief Legal Officer. For the avoidance of doubt, any interests in oil and natural gas leases or royalties held by a Covered Party or a Covered Party’s immediate family member, including interests acquired as an inheritance or gift and, particularly, but not limited to, instances in which the Company is the operator of the lease or well, should be fully disclosed to the Company.
This Code does not attempt to describe all possible conflicts of interest that could develop. Other common conflicts from which Covered Parties must refrain are set out below:
The information in the Company’s public communications, including in all reports and documents filed with or submitted to the SEC, must be full, fair, accurate, timely, and understandable.
To ensure the Company meets this standard, all Covered Parties (to the extent they are involved in the Company’s disclosure process) are required to maintain familiarity with the disclosure requirements, processes, and procedures applicable to the Company commensurate with their duties. Covered Parties are prohibited from knowingly misrepresenting, omitting, or causing others to misrepresent or omit material facts about the Company to others, including the Company’s independent auditors, governmental regulators, and self-regulatory organizations.
The Company is obligated to comply with all applicable laws, rules, and regulations. It is the personal responsibility of each Covered Party to adhere to the standards and restrictions imposed by these laws, rules, and regulations in the performance of his or her duties for the Company.
The Chief Executive Officer, Chief Financial Officer, and Chief Accounting Officer or Controller (or persons performing similar functions) of the Company are also required to promote compliance by all employees with this Code and to abide by Company standards, policies, and procedures.
Trading on inside information is a violation of federal securities law. Covered Parties in possession of material non-public information about the Company or companies with whom the Company does business must abstain from trading or advising others to trade in the respective company’s securities from the time that they obtain such inside information until adequate public disclosure of the information. Material information is information of such importance that it can be expected to affect the judgment of investors as to whether or not to buy, sell, or hold the securities in question. To use non-public information for personal financial benefit or to “tip” others, including family members, who might make an investment decision based on this information is not only unethical but also illegal. Covered Parties who trade stock based on insider information can be personally liable for damages totaling up to three times the profit made or loss avoided by the respective Covered Party.
The Company promotes ethical behavior at all times and encourages Covered Parties to talk to supervisors, managers, and other appropriate personnel, including the Company’s Chief Legal Officer, its other officers, outside counsel for the Company, and/or the Board, when in doubt about the best course of action in a particular situation.
Covered Parties should promptly report suspected violations of laws, rules, regulations, or this Code or any other unethical behavior by any manager, officer, or employee, or anyone purporting to be acting on the Company’s behalf, to appropriate personnel, including the Company’s Chief Legal Officer. Reports may be made anonymously. If requested, confidentiality will be maintained, subject to applicable law, regulations, and legal proceedings.
The Board and/or the Company’s Chief Legal Officer shall investigate and determine, or shall designate appropriate persons to investigate and determine, the legitimacy of such reports. The Board and/or the Company’s Chief Legal Officer will then determine the appropriate disciplinary action. Such disciplinary action includes, but is not limited to, reprimand, termination with cause, and possible civil and criminal prosecution.
To encourage employees to report any and all violations, the Company will not tolerate retaliation for reports made in good faith. Retaliation or retribution against any Covered Party for a report made in good faith of any suspected violation of laws, rules, regulations, or this Code is cause for appropriate disciplinary action.
All Covered Parties owe a duty to the Company to advance the legitimate interests of the Company when the opportunity to do so arises. Covered Parties are prohibited from directly or indirectly: (a) taking personally for themselves opportunities that are discovered through the use of Company property, information, or positions; (b) using Company property, information, or positions for personal gain; or (c) competing with the Company for business opportunities; provided, however, that if the Board determines that the Company will not pursue an opportunity that relates to the Company’s business, a Covered Party may do so after notifying the Board of intended actions in order to avoid any appearance of conflict of interest.
In carrying out the Company’s business, Covered Parties may learn confidential or proprietary information about the Company or its customers, distributors, suppliers, or joint venture partners. Confidential or proprietary information includes all non-public information relating to the Company, or other companies, that would be harmful to the relevant company or useful or helpful to competitors if disclosed, including financial results or prospects, information provided by a third party, trade secrets, new product or marketing plans, research and development ideas, manufacturing processes, potential acquisitions or investments, or information of use to our competitors or harmful to us or our customers if disclosed.
Covered Parties must maintain the confidentiality of all information so entrusted to them, except when disclosure is authorized or legally mandated. Covered Parties must safeguard confidential information by keeping it secure, limiting access to those who have a need to know in order to do their job, and avoiding discussion of confidential information in public areas such as planes, elevators, and restaurants and on mobile phones. This prohibition includes, but is not limited to, inquiries made by the press, analysts, investors, or others. Covered Parties also may not use such information for personal gain. These confidentiality obligations continue even after employment with the Company ends.
The foregoing confidentiality obligations shall not diminish or alter any obligations of confidentiality contained in a separate confidentiality agreement signed by a Covered Party for the benefit of the Company.
Each Covered Party should endeavor to deal fairly with the Company’s customers, service providers, suppliers, competitors, and employees. No Covered Party should take unfair advantage of anyone through manipulation, concealment, abuse of privileged information, misrepresentation of material facts, or any unfair dealing practice. Inappropriate use of proprietary information, misusing trade secret information that was obtained without the owner’s consent, or inducing such disclosures by past or present employees of other companies is also prohibited.
All Covered Parties should protect the Company’s assets and ensure their efficient use. Theft, carelessness, and waste have a direct impact on the Company’s profitability. All Company assets should be used only for legitimate business purposes. The obligation of employees to protect the Company’s assets includes its proprietary information, as wells as its oil and natural gas assets. Proprietary information includes intellectual property such as trade secrets, patents, trademarks, and copyrights, as well as business, marketing, and service plans, engineering and manufacturing ideas, designs, databases, records, salary information, and any unpublished financial data and reports.
Before an employee, or an immediate family member of any such employee, engages in any activity that would be otherwise prohibited by this Code, he or she is strongly encouraged to obtain a written waiver from the Company’s Chief Legal Officer.
Before an executive officer, or an immediate family member of an executive officer, engages in any activity that would be otherwise prohibited by this Code in Articles I through IX above, he or she must obtain a written waiver from the Board. To the extent then required by any applicable securities exchange, such waiver must then be disclosed to the Company’s equity holders, along with the reasons for granting the waiver.
All financial books, records, and accounts must accurately reflect transactions and events, and conform both to generally accepted accounting principles and to the Company’s system of internal controls. No entry may be made that intentionally hides or disguises the true nature of any transaction. Covered Parties should therefore attempt to be as clear, concise, truthful, and accurate as possible when recording any information.
Federal law prohibits the Company to make loans and guarantees of obligations to managers, executive officers, and members of their immediate families.
The purpose of business gifts and entertainment in a commercial setting is to create goodwill and sound working relationships, not to gain unfair advantage with customers. Covered Parties must act in a fair and impartial manner in all business dealings. Gifts and entertainment should further the business interests of the Company and not be construed as potentially influencing business judgment or creating an obligation.
Gifts must not be lavish or in excess of the generally accepted business practices of one’s country and industry.² Gifts of cash or cash equivalents are never permitted. Requesting or soliciting personal gifts, favors, entertainment, or services is unacceptable. Covered Parties should contact the Company’s Chief Legal Officer to discuss if they are not certain that a gift is appropriate.
The FCPA prohibits giving anything of value, directly or indirectly, to officials of foreign governments or foreign political candidates in order to obtain or retain business. It is strictly prohibited to make illegal payments to government officials of any country. In addition, the promise, offer, or delivery to an official or employee of the U.S. government of a gift, favor, or other gratuity in violation of these rules would not only violate Company policy but could also be a criminal offense. State and local governments, as well as foreign governments, may have similar rules.
Covered Parties may not own, either directly or indirectly, a substantial interest in any business entity that does or seeks to do business with or is in competition with the Company without providing advance notice to the Chief Legal Officer. Investments in publicly traded securities of companies not amounting to more than 1% of that company’s total outstanding shares are permitted without such advanced approval.
The purpose of antitrust laws is to preserve fair and open competition and a free market economy, which are goals that the Company fully supports. Covered Parties must not directly or indirectly enter into any formal or informal agreement with competitors that fixes or controls prices, divides or allocates markets, limits the production or sale of products, boycotts certain suppliers or customers, eliminates competition, or otherwise unreasonably restrains trade.
Covered Parties may participate in the political process as individuals on their own time. However, Covered Parties must make every effort to ensure that they do not create the impression that they speak or act on behalf of the Company with respect to political matters. Company contributions to any political candidate or party or to any other organization that might use the contributions for a political candidate or party are prohibited. A Covered Party may not receive any reimbursement from corporate funds for a personal political contribution.
The Company is an equal opportunity employer and will not tolerate illegal discrimination or harassment of any kind. The Company is committed to providing a workplace free of discrimination and harassment based on race, color, religion, age, gender, national origin, ancestry, sexual orientation, disability, veteran status, or any other basis prohibited by applicable law.
Examples include derogatory comments based on a person’s protected class and sexual harassment and unwelcome sexual advances. Similarly, offensive or hostile working conditions created by such harassment or discrimination will not be tolerated.
The Company is committed to managing and operating its assets in a manner that is protective of human health and safety and the environment. It is our policy to comply with both the letter and the spirit of the applicable health, safety, and environmental laws and regulations and to attempt to develop a cooperative attitude with government inspection and enforcement officials. Covered Parties are encouraged to report conditions that they perceive to be unsafe, unhealthy, or hazardous to the environment.
Covered Parties should take care when presenting themselves in public settings, as well as online and in web-based forums or networking sites. Each Covered Party is encouraged to conduct himself or herself in a responsible, respectful, and honest manner at all times. The Company understands that Covered Parties may wish to create and maintain a personal presence online using various forms of social media. However, in so doing, Covered Parties should include a disclaimer that the views expressed therein do not necessarily reflect the views of the Company. Covered Parties should be aware that even after a posting is deleted, certain technology may still make that content available to readers.
Covered Parties are prohibited from using or disclosing confidential, proprietary, sensitive, or trade secret information of the Company, its partners, vendors, consultants, or other third parties with which the Company does business. Harassment of other managers, officers, or employees will also not be tolerated. A Covered Party may not provide any content to Company social media sites that may be construed as political lobbying or solicitation of contributions or use the sites to link to any sites sponsored by or endorsing political candidates or parties, or to discuss political campaigns, political issues, or positions on any legislation or law.
This Code is a statement of certain fundamental principles, policies, and procedures that govern the Covered Parties in the conduct of the Company’s business. It is not intended to and does not create any rights in any employee, customer, client, visitor, supplier, competitor, equity holder, or any other person or entity. It is the Company’s belief that this Code is robust and covers most conceivable situations.
¹ Item 404(a) of SEC Regulation S-K defines “immediate family member” as a person’s child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, or any person (other than a tenant or employee) sharing the person’s household.
² In general, no gift, entertainment, or business courtesy should be offered, given, provided, or accepted unless it: (1) is not a gift of cash, stock, or negotiable instruments; (2) is consistent with customary business practices; (3) is not excessive in value (less than $150); (4) cannot be construed as a bribe or payoff; and (5) does not violate any laws or regulations. Covered Parties and members of their immediate families may not offer, give, or receive gifts from persons or entities who deal with the Company: (a) in those cases where the gift would be illegal or result in a violation of law; (b) as part of an agreement to do anything in return for the gift, (c) if the gift has a value beyond what is normal and customary in the Company’s business; (d) if for managers, the gift is being made to influence the manager’s actions as a member of the Board; or (e) if the gift could create the appearance of a conflict of interest.
If you have any questions about this Code of Ethics, you can contact us by visiting this page on our website: https://www.phoenixenergy.com/contact/
Phoenix Energy One, LLC (“Phoenix Energy” or the “Company”) conducts offerings pursuant to (i) Rule 506(c) of Regulation D (“Private Placement Offerings”) of the Securities Act of 1933, as amended (the “Securities Act”) and (ii) an effective registration statement on Form S-1 under the Securities Act (including a prospectus) filed with the SEC (the “Registered Offering”, and together with the Private Placement Offerings, the “Offerings”)
THIS COMMUNICATION DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES, AND SHALL NOT CONSTITUTE AN OFFER, SOLICITATION, OR SALE OF ANY SECURITY, IN ANY JURISDICTION IN WHICH SUCH OFFERING, SOLICITATION, OR SALE WOULD BE UNLAWFUL.
The Private Placement Offerings are exempt from the registration requirements of the Securities Act and only “accredited investors”, as such term is defined in Rule 501 of Regulation D., may invest in such offerings. For more details, you can review accreditation requirements here. The Company has posted a private placement memorandum (together with any related amendments and supplements thereto, the “private placement memorandum”) on its website, which can be accessed via the following link: https://phoenixenergy.com/investment-offerings/
The Registered Offering is being made pursuant to an effective registration statement and prospectus, filed, or registered with the U.S. Securities and Exchange Commission (“SEC”) and appropriate state regulatory agencies. For the Registered Offering only investors meeting certain criteria, including the financial suitability requirements, may invest in the Registered Offering. The eligibility requirements may be found in the offering documentation, including the prospectus, that the Company has filed on EDGAR with the SEC and can be found at www.sec.gov, where you can obtain a free copy of the prospectus. Alternatively, Phoenix Energy or a registered representative of Dalmore will supply additional materials when requested. Call 303.376.9778 or email [email protected] to place a request.
Before you invest, you should read the offering documentation for the relevant Offering, including, with respect to the Registered Offering, the prospectus, and other documents that the Company has filed with the SEC.
While the Company may use general solicitation and general advertising with respect to its debt offerings, which may be conducted through a number of different means, including, among others, the internet, social media, seminars/webinars, and print, the Company will take reasonable steps to verify that the purchasers investing in such offerings meet the applicability suitability standards criteria, including being an “accredited investor” if purchasing securities pursuant to our Private Placement Offering. To that end, investors wishing to purchase securities in such offerings will be required to provide certain supporting materials and other information to the Company for the purpose of verifying “accredited investor” status. Any investment decision will be made only based on the information included in, and for the securities described in, the related offering documents.
Certain of Phoenix Energy’s non-executive personnel are licensed registered representatives of Dalmore Group, LLC. These registered representatives conduct securities business through Dalmore, a registered broker-dealer and member of FINRA/SIPC. Dalmore and Phoenix Energy are not affiliated entities.
Investing is subject to risks and should be made only by persons or entities able to bear the risk of and to withstand the total loss of their investment. Investors should always conduct their own due diligence and consult with a reputable financial advisor, attorney, accountant, and any other professional that can help them to understand and assess the risks associated with any investment opportunity. Major risks, including those related to the potential loss of some or all principal, are disclosed in the private placement memorandum and prospectus for the Company’s Offerings. These Offerings are speculative and illiquid and past performance is not indicative of future results.
The materials set forth on the Company’s website and presentations were prepared by the Company and the analyses contained therein are based, in part, on certain assumptions made by and information obtained from the Company and/or from other sources. The information may not be comprehensive and has not been subject to any independent audit or review. The Company’s internal estimates have not been verified by an external expert, and we cannot guarantee that a third party using different methods would obtain or generate the same results. The Company does not make any representation or warranty, express or implied, in relation to the fairness, reasonableness, adequacy, accuracy or completeness of the information, statements or opinions, whichever their source, contained in such materials or any oral information provided in connection with its presentations or discussions with investors, or any data it generates, and accepts no responsibility, obligation or liability (whether direct or indirect, in contract, tort or otherwise) in relation to any of such information. The information and opinions contained in the materials are provided as of the date specified therein, are subject to change without notice and do not purport to contain all information that may be required to evaluate the Company. The Company and its affiliates, officers, employees, and agents expressly disclaim any and all liability which may be based on the materials and any errors therein or omissions therefrom. Neither the Company nor any of its affiliates, officers, employees or agents makes any representation or warranty, express or implied, that any transaction has been or may be affected on the terms or in the manner stated in the materials, or as to the achievement or reasonableness of estimates, prospects or returns, if any. You are cautioned not to give undue weight to such estimates. Numerical figures in the materials have been subject to rounding adjustments. Accordingly, numerical figures shown as totals in various tables may not be arithmetic aggregations of the figures that precede them.
The materials include forward looking statements that reflect the Company’s current views with respect to, among other things, the Company’s growth, operations, and financial performance. Forward looking statements include all statements that are not historical facts. These forward-looking statements relate to matters such as the Company’s industry, business strategy, goals, and expectations concerning our market position, future operations, margins, profitability, capital expenditures, liquidity, and capital resources and other financial and operating information. These forward-looking statements are generally identifiable by forward looking terminology such as “expect,” “believe,” “anticipate,” “outlook,” “could,” “target,” “project,” “intend,” “plan,” “seek,” “estimate,” “should,” “will,” “approximately,” “predict,” “potential,” “may,” and “assume,” as well as variations of such words and similar expressions referring to the future. Oral information provided in connection with the Company’s presentations or discussions with investors may similarly include forward looking statements.
The forward-looking statements contained in the materials, including but not limited to any outlook, targets, or projections, are based on management’s current expectations and are not guarantees of future performance. The forward-looking statements are subject to various risks, uncertainties, assumptions, or changes in circumstances that are difficult to predict or quantify. For example, projections included in the materials assume the Company has continued access to adequate sources of capital to fund operations. The Company’s expectations, beliefs, and projections are expressed in good faith, and the Company’s management believes there is a reasonable basis for them. However, there can be no assurance that management’s expectations, beliefs, and projections will result or be achieved.
Actual results may differ materially from these expectations due to changes in global, regional, or local economic, business, competitive, market, regulatory, and other factors, many of which are beyond our control. Management believes that these factors include but are not limited to the risk factors the Company has identified in its offering documents under “Risk Factors.” Risk Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. The Company may not actually achieve the plans, intentions or expectations disclosed in such forward-looking statements and you should not place undue reliance on the Company’s forward-looking statements. The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether because of new information, future developments or otherwise, except as may be required by any applicable securities laws.
The SEC generally permits oil and gas companies, in filings made with the SEC, to disclose proved reserves, which are reserve estimates that geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions, and certain probable and possible reserves that meet the SEC’s definitions for such terms. The Company discloses estimated proved reserves and estimated probable reserves in its filings with the SEC. The Company’s estimated reserves are prepared by the Company’s internal reservoir engineer and comply with definitions promulgated by the SEC. These estimated reserves are not audited by an independent petroleum engineering firm. Additional information on the Company’s estimated reserves is contained in the Company’s filings with the SEC. In these materials, the Company may use the terms “resources,” “resource potential” or “potential resources,” which SEC guidelines prohibit issuers from including in filings with the SEC. “Resources,” “resource potential” or “potential resources” refer to the Company’s internal estimates of hydrocarbon quantities that may be potentially discovered through exploratory drilling or recovered with additional drilling or recovery techniques. Such terms do not constitute reserves within the meaning of the Standards Pertaining to the Estimating and Auditing of Oil and Gas Reserves Information promulgated by the Society of Petroleum Engineers or SEC rules and do not include any proved reserves. Actual quantities that may be ultimately recovered will differ substantially. Factors affecting ultimate recovery include the scope of drilling programs, which will be directly affected by the availability of capital, drilling and production costs, availability of drilling services and equipment, drilling results, lease expirations, transportation constraints, regulatory approvals and other factors and actual drilling results, including geological and mechanical factors affecting recovery rates. Estimates may change significantly as development of properties provides additional data. In addition, our production forecasts and expectations for future periods are dependent upon many assumptions, including estimates of production, decline rates from existing wells and the undertaking and outcome of future drilling activity, which may be affected by significant commodity price declines or drilling cost increases. Estimated proved reserves and estimated probable reserves do not represent or measure the fair value of the respective properties or the fair market value at which a property or properties could be sold. In the event of any such sale, proceeds to the Company may be significantly less than the value of the estimated reserves.
Certain materials contain “non-GAAP financial measures” that are financial measures that either exclude or include amounts that are not excluded or included in the most directly comparable measures calculated and presented in accordance with accounting principles generally accepted in the United States (“GAAP”). Specifically, the Company presents “EBITDA” as a supplemental measure of financial performance that is not required by, or presented in accordance with, GAAP. The Company believes this measure can assist investors in comparing the Company’s operating performance across reporting periods on a consistent basis by excluding items that it does not believe are indicative of its core operating performance. Management believes these non-GAAP measures are useful in highlighting trends in the Company’s operating performance, while other measures can differ significantly depending on long term strategic decisions regarding capital structure, capital investments, etc. Management uses these non-GAAP measures to supplement GAAP measures of performance in the evaluation of the effectiveness of the Company’s business strategies and to make budgeting decisions. Management supplements GAAP results with non-GAAP financial measures to provide a more complete understanding of the factors and trends affecting the business than GAAP results alone provide. However, this measure should not be considered as an alternative to net income (loss) as a measure of financial performance or cash provided by operating activities as a measure of liquidity, or any other performance measure derived in accordance with GAAP. The presentation of this measure has limitations as an analytical tool and should not be considered in isolation, or as a substitute for the Company’s results as reported under GAAP.
The Phoenix Energy designed logo, and our other registered or common law trademarks, service marks, or trade names appearing in the materials are the property of the Company. Solely for convenience, trademarks, tradenames, and service marks referred to in the materials appear without the ®, TM, and SM symbols, but those references are not intended to indicate, in any way, that the Company will not assert, to the fullest extent under applicable law, its rights to these trademarks, tradenames, and service marks. The materials may contain additional trademarks, tradenames, and service marks of other companies that are the property of their respective owners. The Company does not intend our use or display of other companies’ trademarks, trade names, or service marks to imply relationships with, or endorsement or sponsorship of the Company by, these other companies.
An investment in these offerings or any offering is highly speculative and suitable only for persons or entities bonds, evaluate the risks of the investment and an investment should be made only by persons or entities able to bear the risk of and to withstand the total loss of their investment. Prospective investors should consider the following risks, as well as the other risk factors set forth in our offering materials before bonds, to purchase our bonds.
Risks Related to the Bonds and to these Offerings Include, Among Other Risks:
Risks Related to Our Business and Operations Include, Among Other Risks:
Phoenix Capital Group Holdings, LLC is now Phoenix Energy One, LLC doing business as Phoenix Energy.