COMMITMENTS AND CONTINGENCIES

Commitments

Office and Equipment Leases

We lease office space and certain field equipment under long-term operating lease agreements. For the Successor Period, the 2018 Predecessor Period and the years ended December 31, 2017, and 2016, total net lease payments, was approximately $7.8 million, $0.1 million, $7.8 million, and $3.6 million, respectively.

At December 31, 2018, we have the remaining future minimum lease payments:



Fiscal Year	In thousands
2019	$	2,819
2020	2,851
2021	2,911
2022	3,107
2023	3,038
Thereafter	12,219
	$	26,945

Gas Processing Reservation Commitment

We entered into an agreement with KFM to reimburse half of the expenses associated with any shortfall in committed volumes not physically delivered. The amounts below represent the total maximum cash payment required if KFM does not deliver to a third party for processing. This commitment extends through 2021 with the following commitments at December 31, 2018:



Fiscal Year	In thousands
2019	$	1,551
2020	1,556
2021	1,551
	$	4,658

During the period February 9, 2018 through December 31, 2018, cash payments required under our commitments totaled approximately $0.1 million.

Firm Natural Gas Transportation Commitments

We have entered into certain firm commitments intended to secure capacity on third party pipelines for transportation of our natural gas that extend through 2028 with the following commitments at December 31, 2018:



Fiscal Year	In thousands
2019	$	12,236
2020	12,236
2021	12,236
2022	12,236
2023	12,236
Thereafter	25,023
	$	86,203

Contingencies

Environmental claims

Various landowners have sued Alta Mesa in lawsuits concerning several fields in which Alta Mesa’s subsidiaries have, or historically had, operations. The lawsuits seek injunctive relief and other relief, including unspecified amounts in both actual and punitive damages for alleged breaches of mineral leases and alleged failure to restore the plaintiffs’ lands from alleged contamination and otherwise from its oil and gas operations. We are unable to express an opinion with respect to the likelihood of an unfavorable outcome of the various environmental claims or to estimate the amount or range of potential loss should the outcome be unfavorable. Therefore, we have not provided any material amounts for these claims in our consolidated financial statements at December 31, 2018.

Title/lease disputes

Title and lease disputes may arise in the normal course of our operations. These disputes are usually small but could result in an increase or decrease in reserves and/or other forms of settlement, such as cash, once a final resolution to the title dispute is made.

Litigation

On January 30, 2019, AMR, James T. Hackett, AMR’s interim Chief Executive Officer and Chairman of the Board, certain of AMR’s former and current directors, Thomas J. Walker, AMR’s former Chief Financial Officer, and Riverstone Investment Group LLC were named as defendants in a putative securities class action filed in the United States District Court for the Southern District of New York (“SDNY Complaint”). The plaintiff, Plumbers and Pipefitters National Pension Fund, alleges that the defendants disseminated a false and misleading proxy statement in connection with the Business Combination and, therefore, violated Section 14(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Rule 14-9 promulgated thereunder. In addition, the plaintiff alleges that Riverstone and the individual defendants violated Section 20(a) of the Exchange Act. The plaintiff is seeking compensatory and/or rescissory damages against the defendants.

On March 14 and 19, 2019, two additional putative securities class action complaints were filed in the U.S. District Court for the Southern District of Texas (“SDTX Complaints”) against the same defendants named in the SDNY Complaint, and Harlan H. Chappelle and Michael A. McCabe, AMR’s former President and Chief Executive Officer and Chief Financial Officer, respectively. These complaints are the same claims asserted in the initial complaint, but also add claims under Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder against AMR and certain of its current and former officers on behalf of all persons or entities who purchased or otherwise acquired Silver Run or AMR securities between March 24, 2017, and February 25, 2019. The new claims are based upon alleged misstatements contained in AMR’s proxy statement and made after the Business Combination. The plaintiffs seek compensatory and/or rescissory damages against the defendants.

The outcome of the above securities class action complaints is uncertain, and while we believe that AMR has valid defenses to the plaintiff’s claims and intend to defend the lawsuits vigorously, no assurance can be given as to the outcome of the lawsuits. We are not a party to these suits but an adverse outcome could potentially impact our business.

On March 1, 2017, Mustang Gas Products, LLC (“Mustang”) filed suit in the District Court of Kingfisher County, Oklahoma, against Oklahoma Energy Acquisitions, LP, and eight other entities, including certain of our affiliates and subsidiaries. Mustang alleges that (1) Mustang is a party to gas purchase agreements with Oklahoma Energy containing gas dedication covenants that burden land, leases and wells in Kingfisher County, Oklahoma, and (2) Oklahoma Energy, in concert with the other defendants, has wrongfully diverted gas sales to KFM in contravention of these agreements. Mustang asserts claims for declaratory judgment, anticipatory repudiation and breach of contract against Oklahoma Energy only. Mustang also claims tortious interference with contract, conspiracy, and unjust enrichment/constructive trust against all defendants. We believe that the allegations contained in this lawsuit are without merit and intend to vigorously defend ourselves.

In August 2017, Biloxi Marsh Lands (“Biloxi”) filed suit in the 34th District Court for the Parish of St. Bernard, Louisiana, against Meridian Resource & Exploration LLC (a subsidiary of HMI), us, and other defendants. Biloxi alleges negligent construction, installation, maintenance, use and operation of a pipeline. In lieu of litigating corporate structure allegations and to reduce potential litigation expenses, we stipulated with respect to Biloxi that we would be bound by and assume liability and responsibility for any unpaid debts, obligations or final judgments that may be entered against Meridian in favor of Biloxi in this matter. However, these allegations relate to non-STACK oil and gas assets that we distributed to a subsidiary of HMI prior to the Business Combination. In connection with that distribution, certain HMI subsidiaries agreed to indemnify and hold us harmless from any liabilities associated with those non-STACK oil and gas assets, regardless of when those liabilities arose. Consequently, we believe that any potential damages incurred by us or Meridian as a result of these allegations are the responsibility of HMI. There is no guarantee that HMI will pay any settlement amounts or judgments rendered against us or Meridian. In addition, our ability to collect any amounts due pursuant to these indemnification obligations will depend upon the liquidity and solvency of HMI.

SEC Investigation

The SEC is conducting a formal investigation into, among other things, the facts involved in the material weakness in our internal controls over financial reporting and the impairment charge disclosed previously and in this annual report. We are cooperating with this investigation. At this point we are unable to predict the timing or outcome of this investigation. If the SEC determines that violations of the federal securities laws have occurred, the agency has a broad range of civil penalties and other remedies available, some of which, if imposed on us, could be material to our business, financial condition or results of operations.

Other contingencies

We are subject to legal proceedings, claims and liabilities arising in the ordinary course of business. The outcomes cannot be reasonably estimated; however, in our opinion, such litigation and claims will be resolved without material adverse effect on our financial position, results of operations or cash flows. Accruals for losses associated with litigation are made when losses are deemed probable and can be reasonably estimated. Because legal proceedings are inherently unpredictable and unfavorable resolutions could occur, assessing contingencies is highly subjective and requires judgments about uncertain future events. When evaluating contingencies, the Company may be unable to provide a meaningful estimate due to a number of factors, including the procedural status of the matter in question, the presence of complex or novel legal theories, and/or the ongoing discovery and development of information important to the matters.

Performance appreciation rights

Our Predecessor had a plan that was intended to provide incentive compensation to key employees and consultants. We canceled all remaining amounts due under the plan at the time of the Business Combination, but recognized and paid $10.9 million as strategic costs in G&A during the Successor Period.