Commitments and Contingencies

12 Months Ended

Dec. 31, 2019

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

COMMITMENTS AND CONTINGENCIES  

Legal Matters

The Company is party to proceedings and claims incidental to its business. While many of these matters involve inherent uncertainty, the Company believes that the amount of the liability, if any, ultimately incurred with respect to any such proceedings or claims will not have a material adverse effect, individually or in the aggregate, on the Company’s consolidated financial position as a whole or on its liquidity, capital resources or future results of operations. The Company will continue to evaluate proceedings and claims involving the Company on a regular basis and will establish and adjust any reserves as appropriate to reflect its assessment of the then-current status of the matters.

Environmental Obligations

The Company is subject to various federal, state and local laws and regulations relating to the protection of the environment. These laws, which are often changing, regulate the discharge of materials into the environment and may require the Company to remove or mitigate the environmental effects of the disposal or release of petroleum or chemical substances at various sites. Environmental expenditures are expensed as incurred. The Company has established procedures for the ongoing evaluation of its operations, to identify potential environmental exposures and to comply with regulatory policies and procedures.

The Company accounts for environmental contingencies in accordance with the accounting guidance related to accounting for contingencies. Environmental expenditures that relate to current operations are expensed or capitalized as appropriate. Expenditures that relate to an existing condition caused by past operations, which 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. Such liabilities are generally undiscounted unless the timing of cash payments is fixed and readily determinable. At December 31, 2019 and 2018, the Company had no environmental matters requiring specific disclosure or requiring the recognition of a liability.

Operating and Finance Leases

The Company’s estimated future minimum lease payments under long-term operating and finance lease agreements as of December 31, 2019 are associated with the Company’s adoption of ASC 842 and relate to lease payment maturities. The Company’s operating leases include drilling rigs, real estate, and other field and office equipment and the Company’s finance leases include vehicles. See Note 9—Leases for additional information.

Derivative Obligations

The Company’s future deferred premium payments related to derivative agreements as of December 31, 2019 was as follows (in thousands):

	Payments Due by Period
	2020		2021		2022		2023		2024		Thereafter		Total
Derivative obligations	$	58,855	$	—	$	—	$	—	$	—	$	—	$	58,855

Transportation and Crude Oil Sales Agreements

The Company sells oil and natural gas under a variety of contractual agreements, some of which specify the delivery of fixed and determinable quantities.

The following table presents gross volume information, as of December 31, 2019, related to the Company’s long-term transportation and crude oil sales agreements that specify the delivery of fixed and determinable quantities of crude oil:

	For the years ended December 31,
	2020		2021		2022		2023		2024		Thereafter		Total
Oil (MMBbl)(1)	26.6		45.6		43.3		39.7		36.6		61.5		253.3
Dollar commitment(2) (in thousands)	$	41,534	$	79,530	$	79,770	$	75,112	$	70,962	$	126,666	$	473,574

(1)

This table is based on agreements that the Company has signed with third-party pipeline operators as of December 31, 2019. Of the total 253.3 MMBbls, 99.0 MMBbls are subject to the commencement of operations of third party-terminal and pipeline systems.

(2)

These amounts equal the total deficiency fees payable, based on assumptions management considers reasonable, if the Company is unable to meet all of its contractual delivery commitments under its long-term transportation and crude oil sales agreements. Of the total $473.6 million, $204.1 million is associated with delivery commitments subject to the commencement of operations of third-party terminal and pipeline systems.

The Company expects to fulfill these delivery commitments with production from its existing proved developed and proved undeveloped reserves, which the Company regularly monitors to ensure sufficient availability. In addition, the Company monitors its current production, its anticipated future production and its future development plans, in each case factoring in production attributable to third-party working, royalty and overriding royalty interest owners, in order to meet its delivery commitments. If production volumes are not sufficient to meet these contractual delivery commitments, the Company may be subject to deficiency fees. However, in the event the Company is unable to meet any portion of such contractual delivery commitments, the Company may purchase commodities in the market at then-current market prices to satisfy the portion of such commitment that was not delivered, in which case such deficiency fees would not be payable.