NOTE 11 – COMMITMENTS AND CONTINGENCIES

Rental Commitments

We lease office space and equipment under leases with varying expiration dates. For the Successor period September 1, 2016 through December 31, 2016, the Predecessor period from January 1, 2016 through August 31, 2016 and the years ended December 2015 and 2014, rental expense was $3.5 million, $7.8 million, $15.7 million and $17.0 million, respectively.

Future minimum rental commitments for the next five years are as follows (in thousands):

Years Ended December 31,
2017	$	3,781
2018		3,460
2019		1,830
2020		1,651
2021		1,206
Thereafter		668
	$	12,596

Drilling Partnership Commitments

We are the ultimate managing general partner of the Drilling Partnerships and have agreed to indemnify each investor partner from any liability that exceeds such partner’s share of Drilling Partnership assets. We have structured certain Drilling Partnerships to allow limited partners to have the right to present their interests for purchase. Generally, for Drilling Partnerships with this structure, we are not obligated to purchase more than 5% to 10% of the units in any calendar year, no units may be purchased during the first five years after closing for the Drilling Partnership, and we may immediately suspend the presentment structure for a Drilling Partnership by giving notice to the limited partners that we do not have adequate liquidity for redemptions. In accordance with the Drilling Partnership agreement, the purchase price for limited partner interests would generally be based upon a percentage of the present value of future cash flows allocable to the interest, discounted at 10%, as of the date of presentment, subject to estimated changes by us to reflect current well performance, commodity prices and production costs, among other items. Based on our historical experience, as of December 31, 2016, we believe that any such estimated liability for redemptions of limited partner interests in Drilling Partnerships which allow such transactions would not be material.

While our historical structure has varied, we have generally agreed to subordinate a portion of our share of Drilling Partnership gas and oil production revenue, net of corresponding production costs and up to a maximum of 50% of unhedged revenue, from certain Drilling Partnerships for the benefit of the limited partner investors until they have received specified returns, typically from 10% to 12% per year determined on a cumulative basis, over a specified period, typically the first five to eight years, in accordance with the terms of the partnership agreements. We periodically compare the projected return on investment for limited partners in a Drilling Partnership during the subordination period, based upon historical and projected cumulative gas and oil production revenue and expenses, with the return on investment subject to subordination agreed upon within the Drilling Partnership agreement. If the projected return on investment falls below the agreed upon rate, we recognize subordination as an estimated reduction of our pro-rata share of gas and oil production revenue, net of corresponding production costs, during the current period in an amount that will achieve the agreed upon investment return, subject to the limitation of 50% of unhedged cumulative net production revenues over the subordination period. For Drilling Partnerships for which we have recognized subordination in a historical period, if projected investment returns subsequently reflect that the agreed upon limited partner investment return will be achieved during the subordination period, we will recognize an estimated increase in our portion of historical cumulative gas and oil net production revenue, subject to a limitation of the cumulative subordination previously recognized. For the Successor period September 1, 2016 through December 31, 2016, the Predecessor period from January 1, 2016 through August 31, 2016 and the years ended December 31, 2015 and 2014, $0.8 million, $1.0 million, $1.7 million and $5.3 million, respectively, of our gas and oil production revenues, net of corresponding production costs, from certain Drilling Partnerships were subordinated, which reduced gas and oil production revenues and expenses.

Firm Transportation and Gas Gathering Commitments We have certain agreements for firm transportation and gas gathering obligations. Firm transportation agreements provide for transportation capacity rights for specified volumes per day on various pipeline systems. The contracts require us to pay transportation demand charges regardless of the amount of the pipeline capacity we use. Gas gathering agreements require us to make certain minimum payments regardless of the volume of natural gas production. Our firm transportation and gas gathering agreements expire at various dates through 2024. Fixed and determinable portions of our minimum aggregate future payments under these firm transportation and gathering obligations for the next five years are as follows (in thousands):

Years Ended December 31,
2017	$	5,258
2018		4,476
2019		3,876
2020		1,830
2021		1,227
Thereafter		1,493
	$	18,160

As of December 31, 2016, we are committed to expend approximately $20.4 million, principally on drilling and completion expenditures.

Environmental Matters

We and our subsidiaries are subject to various federal, state and local laws and regulations relating to the protection of the environment. We have established procedures for the ongoing evaluation of our and our subsidiaries’ operations, to identify potential environmental exposures and to comply with regulatory policies and procedures. Environmental expenditures that relate to current operations are expensed or capitalized as appropriate. Expenditures that relate to an existing condition caused by past operations and do not contribute to current or future revenue generation are expensed. Liabilities are recorded when environmental assessments and/or clean-ups are probable, and the costs can be reasonably estimated. We and our subsidiaries maintain insurance which may cover in whole or in part certain environmental expenditures. We and our subsidiaries had no environmental matters requiring specific disclosure or requiring the recognition of a liability as of December 31, 2016 and 2015.

Legal Proceedings

We are party to various routine legal proceedings arising out of the ordinary course of our business. We believe that none of these actions, individually or in the aggregate, will have a material adverse effect on our financial condition or results of operations.