Commitments and Contingencies

Contractual Commitments

Future minimum contractual commitments as of December 31, 2018 under non-cancelable agreements having initial or remaining terms in excess of one year are as follows:



	2019		2020		2021		2022		2023		Thereafter
Gas contract	$	1,643	$	1,647	$	680	$	—	$	—	$	—
Office leases	723		—		—		—		—		—
Automobile leases	419		223		77		—		—		—
Total	$	2,785	$	1,870	$	757	$	—	$	—	$	—

The Company has a non-cancelable fixed cost agreement of $1.6 million per year through May 2021 to reserve pipeline capacity of 10,000 MMBtu per day for gathering and processing related to certain Eagle Ford assets in south Texas. As the operator of the properties dedicated to this contract, the gross amount of obligation is provided, however the Company's net share is approximately 31%.

Additionally, the Company leases corporate office space in The Woodlands, Texas and Midland, Texas. Rent expense was approximately $0.9 million and $0.9 million, for the years ended December 31, 2018 and 2017, respectively. Minimum lease payments under the terms of non-cancelable operating leases as of December 31, 2018 are shown in the table above.

Environmental

The Company’s operations are subject to risks normally associated with the drilling, completion and production of oil and gas, including blowouts, fires, and environmental risks such as oil spills or gas leaks that could expose the Company to liabilities associated with these risks.

In the Company’s acquisition of existing or previously drilled well bores, the Company may not be aware of prior environmental safeguards, if any, that were taken at the time such wells were drilled or during such time the wells were operated. The Company maintains comprehensive insurance coverage that it believes is adequate to mitigate the risk of any adverse financial effects associated with these risks.

However, should it be determined that a liability exists with respect to any environmental cleanup or restoration, the liability to cure such a violation could still fall upon the Company. No claim has been made, nor is the Company aware of any liability which the Company may have, as it relates to any environmental cleanup, restoration, or the violation of any rules or regulations relating thereto except for the matter discussed above.

Legal

From time to time, Earthstone and its subsidiaries may be involved in various legal proceedings and claims in the ordinary course of business.

Olenik v. Lodzinksi et al.: On June 2, 2017, Nicholas Olenik filed a purported shareholder class and derivative action in the Delaware Court of Chancery against Earthstone’s Chief Executive Officer, along with other members of the Board, EnCap, Bold, Bold Holdings and OVR. The complaint alleges that Earthstone’s directors breached their fiduciary duties in connection with the Bold Contribution Agreement. The Plaintiff asserts that the directors negotiated the Bold Transaction to benefit EnCap and its affiliates, failed to obtain adequate consideration for the Earthstone shareholders who were not affiliated with EnCap or Earthstone management, did not follow an adequate process in negotiating and approving the Bold Transaction and made materially misleading or incomplete proxy disclosures in connection with the Bold Transaction. The suit seeks unspecified damages and purports to assert claims derivatively on behalf of Earthstone and as a class action on behalf of all persons who held Common Stock up to March 13, 2017, excluding defendants and their affiliates. On July 20, 2018, the Delaware Court of Chancery granted the defendants' motion to dismiss and entered an order dismissing the action in its entirety with prejudice. The Plaintiff filed an appeal with the Delaware Supreme Court. On February 6, 2019, the Delaware Supreme Court heard oral arguments from the Plaintiff and Defendants' counsel and has not yet issued an opinion. Earthstone and each of the other defendants believe the claims are entirely without merit and they intend to mount a vigorous defense. The ultimate outcome of this suit is uncertain, and while Earthstone is confident in its position, any potential monetary recovery or loss to Earthstone cannot be estimated at this time.

On August 18, 2017, litigation captioned Trinity Royalty Partners, LP v. Bold Energy III LLC, et al. was filed with the 142nd Judicial District of the District Court in Midland County, Texas, asserting breach of contract and indemnity claims for alleged damages from loss of property relating to two oil and natural gas wells in which Bold was the operator. Trinity Royalty Partners, LP (“Trinity”) claimed that Bold was required to indemnify Trinity under the terms of an assignment and a Participation and Joint Development Agreement between Bold and Trinity. Damages were claimed to include costs incurred in attempting to repair and restore an oil and natural gas well and for the loss of future reserves attributable to both wells. On November 16, 2018 Trinity and Bold entered into a Confidential Settlement Agreement and Mutual Release whereby Trinity and Bold agreed to settle the lawsuit and release all claims and counterclaims asserted by the parties. As a result, a $4.7 million expense has been recorded to Litigation settlement in the Consolidated Statements of Operations for the year ended December 31, 2018.