COMMITMENTS AND CONTINGENCIES

12 Months Ended

Dec. 31, 2011

COMMITMENTS AND CONTINGENCIES [Abstract]

COMMITMENTS AND CONTINGENCIES

NOTE 8 - COMMITMENTS AND CONTINGENCIES

Services Agreement

The Partnership

We have entered into a Services Agreement with QRM as described in Note 14, under which, QRM will be entitled to a quarterly administrative services fee equal to 3.5% of the Adjusted EBITDA generated by us during the preceding quarter, calculated prior to the payment of the fee. The Partnership has no other commitments as of December 31, 2011.

Operating Lease Commitments

The Predecessor

Approximately 87% of the Predecessor's future minimum rental payments are derived from the Houston corporate office space sublease which commenced September 1, 2009 and terminates December 31, 2012. The leasing agreement contains a four month rent holiday to be taken from the commencement date. A $1.6 million fee was paid by the Predecessor to terminate the Denver corporate office space lease on November 15, 2009. Total rental expense for the Predecessor for the period from January 1, 2010 to December 21, 2010 and for 2009 was $0.8 million and $3.0 million.

Legal Proceedings

The Partnership

In the ordinary course of business, we are involved in various legal proceedings. To the extent we are able to assess the likelihood of a negative outcome for these proceedings, our assessments of such likelihood range from remote to probable. If we determine that a negative outcome is probable and the amount of loss is reasonably estimable, we accrue the estimated amount.  We currently have no legal proceedings with a probable adverse outcome. Therefore, we do not believe that the outcome of these legal proceedings, individually or in the aggregate, will have a materially adverse effect on our financial condition, results of operations or cash flows.

In addition, we do not have any working interests in the Jay Field and are therefore not a party to the Predecessor's pending legal proceedings discussed below.

The Predecessor

The Predecessor was involved in various suits and claims arising in the normal course of business. The Predecessor related entities owning working interests in the Jay Field, brought suit against Santa Rosa County, Florida, protesting the County's assessed value for the Jay interests for calendar years 2009 and 2010. Santa Rosa County assessed the value of the Jay Field at approximately $92 million for each year. The Predecessor made good faith payments for each calendar year based on valuations of $5 million and $45 million. If the County were to prevail in its assessed value, the resulting additional tax to the Predecessor will be approximately $1.3 million for 2009 and $0.8 million for 2010. The Predecessor believed it had a sound case to prevail on an assessed value lower than that asserted by Santa Rosa County for each calendar year.

In April 2011, the Predecessor received a demand letter from a third-party for severance taxes related to production for the past ten years from an operating unit. The total amount claimed is approximately $2 million. Based on an initial evaluation, the Predecessor believed there is no evidence to support a material liability.

In management's opinion, the ultimate outcome of these items would not have a material adverse effect on the Predecessor's consolidated results of operations, financial position or cash flows. Based on management's assessment, no contingent liabilities were recorded as of December 21, 2010.