Commitments And Contingencies

9 Months Ended

Sep. 30, 2011

Commitments And Contingencies [Abstract]

Commitments And Contingencies

8.  COMMITMENTS AND CONTINGENCIES

Contractual Obligations and Commitments

          There have been no significant changes to our contractual obligations and commitments as reported in our 2010 Annual Report on Form 10-K except for a series of contracts with NGTL and additional one-year drilling rig contracts.  In September 2011, we resolved all litigation with Eagle Drilling LLC ("Eagle"), which is described below.

          In April 2011, we entered into the NGTL Project, which will serve our Horn River Asset.  Under these agreements, we agreed to provide financial assurances in the form of letters of credit to NGTL during the construction phase of the project, which is expected to continue through 2014.  Assuming the project is fully constructed and based on estimated costs of C$257.4 million, including taxes of C$27.6 million, we expect to provide cumulative letters of credit as follows:

	NGTL Cumulative
	Financial Assurances(1)
	(C$ in thousands)		(US$ in thousands)
March 1, 2012	$	68,264	$	65,124
October 1, 2012		109,816		104,764
July 1, 2013		148,400		141,574
October 1, 2013		257,400		245,560

⁽¹⁾ A letter of credit for C$32.6 million is outstanding for the NGTL Project as of September 30, 2011.

          Should other companies subscribe to the project, then our financial assurances under the agreements will be reduced.  If the project is terminated by NGTL, then we would be responsible for all of the costs incurred or for which NGTL is liable, and we would have the option to purchase NGTL's rights in the project for a nominal fee.  Should the project be terminated by NGTL, we are required to pay NGTL an additional C$26.4 million.  No amounts have been recognized on our consolidated balance sheet as of September 30, 2011.  Upon completion of the project, all construction-related guarantees will expire.

          We have also entered into agreements to deliver production from our Horn River Asset to NGTL over a 10-year period.  These agreements will be extended in the event NGTL has either not received 1 Tcf of gas from us and other third parties, or recovered its costs as of the end of the 10-year period.  In such event, the extension will be for delivery of minimum volumes of 106 MMcfd until such time that 1 Tcf of gas is delivered.

          Also under the agreements, we are required to treat the gas to meet NGTL pipeline specifications.  Such treatment will require us to construct treating facilities.  We will develop our plans to address the treating requirements prior to the commissioning of the assets being constructed by NGTL.

          In July 2011, we entered into two additional drilling rig contracts, each with a term of one year and combined aggregate commitments of $12.0 million.

          At September 30, 2011, we had $10.0 million in surety bonds issued to fulfill contractual, legal or regulatory requirements and $34.1 million in letters of credit outstanding against the U.S.  Credit Facility.  In early October 2011, a letter of credit for $28.9 million was terminated.  Letters of credit outstanding against the Canadian Credit Facility were $42.9 million, including $31.1 million issued for the NGTL Project.  Surety bonds and letters of credit generally have an annual renewal option.

Contingencies

          On September 26, 2011, we entered into a global settlement agreement with Eagle.  During the third quarter of 2011, we recognized a charge of $8.5 million and funded our entire obligations under this settlement.  Pursuant to this agreement, the Eagle cases filed in Oklahoma and Houston were dismissed.

          Note 14 to the consolidated financial statements in our 2010 Annual Report on Form 10-K contains a more complete description of our contractual obligations, commitments and contingencies for which there are no other significant updates during the nine months ended September 30, 2011.