Note 12. Commitments and Contingencies

In the course of its business affairs and operations, the Company is subject to possible loss contingencies arising from federal, state, and local environmental, health and safety laws and regulations and third party litigation.

Commitments

The following table summarizes the Company’s estimated future contractual commitments as of December 31, 2015 (in thousands):

	2016		2017		2018		2019		2020		Thereafter
Drilling contracts*	$	5,919	$	—	$	—	$	—	$	—	$	—
Gas contract**		1,647		1,643		1,643		1,643		1,647		680
Office leases		724		738		661		627		—		—
Total	$	8,290	$	2,381	$	2,304	$	2,270	$	1,647	$	680

In January 2016, the Company suspended drilling and temporarily laid down the drilling rig. The above obligation reflects a negotiated lower daily drilling rate. Our rig contractor has agreed with the suspension, and the Company will not be required to immediately pay a full termination fee which would otherwise total approximately $5.7 million. Rather, the Company will pay approximately $600,000 per month, with such payments reducing the full termination fee. If industry conditions do not improve, then the Company may continue to further defer drilling operations.

As a part of the 2013 Eagle Ford Acquisition as discussed in Note 3 Acquisitions and Divestitures, the Company ratified several long-term gas purchasing and gas processing contracts. As is customary in the industry, the Company has reserved gathering and processing capacity in a pipeline. In one of the contracts, the Company has a volume commitment, whereby the Company pays the owner of the pipeline a fee of $0.45 per MMBtu to hold 10,000 MMBtu per day of capacity for the Company’s use. Since the time of the acquisition, the Company has not been able to meet its delivery commitments. The rate and terms under this purchasing and processing contract expire on June 1, 2021.

The Company leases corporate office space in The Woodlands, Texas and Denver, Colorado. Rent expense was approximately $0.8 million, $0.4 million, and $0.1 million for the years ended December 31, 2015, 2014, and 2013, respectively. As of December 31, 2015, minimum future lease commitments for subsequent annual periods for all non-cancelable operating leases was approximately $2.8 million.

Contingencies

Environmental

The Company’s operations are subject to risks normally associated with the exploration for and the 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, the Company may be involved in various legal proceedings and claims in the ordinary course of business. In July 2015, EF Non-Op, LLC, a subsidiary of the Company, filed suit in the 125^th Judicial District Court of Harris County, Texas against the operator of its properties in LaSalle County, Texas. In the case EF Non-Op, LLC vs. BHP Billiton Petroleum Properties (N.A.), LP (F/K/A Petrohawk Properties, LP) the Company claims the operator has breached the applicable joint operating agreements in numerous ways, including, but not limited to, improper authorization for expenditure requests, improper and imprudent operations, misrepresentation of charges and excessive billings, as well as refusal to provide requested information. The Company also claims damages from negligent representation and fraud. The Company is seeking all relief to which it is entitled, including consequential damages and attorney’s fees. With respect to a portion of the litigation associated with nine non-operated gas wells that were drilled in 2014 and placed on production in late 2014 and early 2015, BHP Billiton recently elected to deem the Company non-consent regarding costs associated with the drilling, completing and operating of these nine wells, as its sole and exclusive remedy. The Company has accepted this “non-consent” status. The litigation is continuing with respect to other disputes. The outcome of remaining disputes in this proceeding is uncertain, and while the Company is confident in its position, any potential monetary recovery to the Company cannot be estimated at this time.