Commitments and Contingencies

6 Months Ended

Jun. 30, 2013

Commitments and Contingencies.

Commitments and Contingencies

11. Commitments and Contingencies

Contractual Obligations

At June 30, 2013, contractual obligations for drilling contracts, long-term operating leases and seismic contracts are as follows (in thousands):

	Total		2013		2014		2015		2016 and beyond
Drilling contracts	$	21,361	19,520		1,841		—		—
Non-cancellable office lease commitments	$	8,500	709		1,438		1,460		4,893
Seismic contracts	$	5,770	5,770		—		—		—
Net minimum commitments	$	35,631	$	25,999	$	3,279	$	1,460	$	4,893

Litigation

Clovelly Oil Company

The Company is a defendant in an action brought by Clovelly Oil Company (the “Plaintiff” or “Clovelly”) in the 13th Judicial District Court in Louisiana in May 2009. The Plaintiff alleges that the Company is subject to an unrecorded Joint Operating Agreement (“JOA”) dated July 16, 1972, as a result of the Company’s 2007 purchase of a 43.75% working interest in certain acreage. The Plaintiff further alleges that the Company is bound by the 1972 JOA and that the Plaintiff is entitled to 56.25% of the Company’s 242.28-acre Crowell Land & Mineral lease. The Company was not a signatory to the JOA, and believes that it is protected by the Louisiana Public Records Doctrine, which generally provides that instruments involving real property are without effect as to third parties unless the instrument is filed of record in the appropriate mortgage or conveyance records of the parish in which such property is located.

The Company made a motion for summary judgment on all of the Plaintiff’s claims, and the 13th Judicial District Court granted that motion on August 14, 2009. The Plaintiff appealed the district court’s decision to the Third Circuit Court of Appeal, and on April 7, 2010, the Third Circuit Court of Appeal reversed and remanded the case to the district court for trial. On August 9, 2010, the Plaintiff amended its original petition to add Wells Fargo Bank, N. A., which holds a mortgage on the acreage, as a defendant.

On September 27, 2011, the district court granted the Company’s motion for partial summary judgment declaring that the JOA does not apply to any new leases acquired after July 16, 1972 which are not extension or renewal leases. The district court also granted a motion for summary judgment filed by Wells Fargo asserting that, as a mortgage holder of a mortgage covering the applicable lease, Wells Fargo is protected by the Public Records Doctrine. The Plaintiff again appealed.

On June 6, 2012, the Third Circuit Court of Appeal reversed the district court’s partial summary judgment decision that the JOA does not apply to any new leases. It held that, if the Company is subject to the JOA, then the JOA applies to leases acquired by the Company after the 2007 purchase that are within the acreage covered by the JOA. Separately, the Third Circuit Court of Appeal upheld the district’s court decision that Wells Fargo is protected by the Public Records Doctrine. The Third Circuit Court of Appeal then remanded the case to the district court for a determination of whether the Company had assumed the obligations under the JOA.

On December 14, 2012 the Louisiana Supreme Court granted the Company’s petition seeking a review and reversal of the Third Circuit Court of Appeal’s September 2012 decision in the Company’s ongoing litigation with Clovelly Oil. On March 19, 2013, the Louisiana Supreme Court held that the JOA does not apply to new leases acquired by the Company after the time the JOA was executed on July 16, 1972 and unanimously reversed the Third Circuit Court of Appeals decision and reinstated the 13th Judicial District Court’s ruling where it granted the Company’s motion for partial summary judgment.

On May 3, 2013, the Louisiana Supreme Court denied Clovelly’s Application for Rehearing. The Company intends to seek dismissal of Clovelly’s claims with the 13th Judicial District Court, as the Supreme Court’s ruling held for the Company on the central matter at issue in the action. This dismissal would eliminate any exposure to the Company from this lawsuit, as all leases at issue in the matter were acquired after July 16, 1972.

Other

We are involved in other disputes or legal actions arising in the ordinary course of our business. We may not be able to predict the timing or outcome of these or future claims and proceedings with certainty, and an unfavorable resolution of one or more of such matters could have a material adverse effect on our financial condition, results of operations or cash flows. Currently, we are not party to any legal proceedings that, individually or in the aggregate, are reasonably expected to have a material adverse effect on our financial position, results of operations, or cash flows.