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Commitments And Contingencies
6 Months Ended
Jun. 30, 2013
Commitments And Contingencies [Abstract]  
Commitments And Contingencies

NOTE 9 – COMMITMENTS AND CONTINGENCIES

 

Property Reclamation Deposit

 

As a part of our acquisition of certain oil producing properties from the Fund in December 2012, we acquired a property reclamation deposit and letters of credit related to future abandonment and remediation obligations. In an acquisition between ExxonMobil Corporation (the “Seller”) and the Fund in 2006, the Fund was required to deposit  $10.7 million into an escrow account as security for abandonment and remediation obligations. As of June 30, 2013 and December 31, 2012, $10.7 million was recorded in other assets on the consolidated balance sheets related to the deposit. We are required to maintain the escrow account in effect for three years after all abandonment and remediation obligations have been completed. The funds in the escrow account are not to be returned to us until the later of three years after satisfaction of all abandonment obligations or December 31, 2026. At certain dates subsequent to closing, we have the right to request a refund of a portion or all of the property reclamation deposit. Granting of the request is at the Seller’s sole discretion. In addition to the cash deposit, the Fund was required to provide a $3.0 million letter of credit in favor of the Seller and an additional $3.0 million letter of credit each year through 2012 for a total of $23.4 million.

 

NPI Obligation

 

As a part of our acquisition of certain oil producing properties from the Fund in December 2012, we assumed a net profit interest obligation. Under the arrangement with the outside interest owner, we carry the working interest until historical expenditures are recovered. Once the expenditures are recovered, we will not carry the interest but will retain the future development costs and abandonment obligation which is currently reflected in our asset retirement obligations as of June 30, 2013 and December 31, 2012. The cost of this future obligation is funded through current proceeds attributable to the owner’s interest.

 

Lease Guarantees 

   

The Fund has entered into various lease contracts that can routinely extend beyond five years which list the Partnership as a guarantor. In December 2012, we were named guarantor for QRM’s office lease in Houston, Texas with an approximate value of $26.8 million that terminates in 2022.  

 

Legal Proceedings

 

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. 

 

Environmental Contingencies

 

As of June 30, 2013 and December 31, 2012, we had approximately $1.7 million and $1.9 million in environmental liabilities related to the Prize Acquisition, respectively. This is management’s best estimate of the costs for remediation and restoration with respect to these environmental matters, although the ultimate cost could vary. The environmental liability is recorded in the other liabilities caption on the consolidated balance sheet. Inherent uncertainties exist in these estimates primarily due to unknown conditions, changing governmental regulation and legal standards regarding liability, and emerging remediation technologies for handling site remediation and restoration.