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Commitments and Contingencies

9 Months Ended

Sep. 30, 2020

Commitments And Contingencies Disclosure [Abstract]

Note 12—Commitments and Contingencies

(a) Legal Matters

From time to time, the Company is a party to legal proceedings arising in the ordinary course of business. Management does not believe that a material loss is probable as a result of any legal proceedings to which the Company is a party.

Following the announcement of the Southwestern Merger Agreement, six complaints have been filed by purported Company stockholders challenging the merger; of those six complaints, three were filed in the United States District Court for the Southern District of New York, one in the United States District Court for the Eastern District of New York, one in the United States District Court for the District of Delaware and one in the Supreme Court of the State of New York, County of New York. The complaints are captioned as follows: Dinardo v. Montage Resources Corporation, et al., No. 1:20-cv-08416 (S.D.N.Y.); Raul v. Montage Resources Corporation, et al., No. 1:20-cv-08619 (S.D.N.Y.); Waldrop v. Montage Resources Corporation, et al., No. 1:20-cv-04995 (E.D.N.Y.); Wolf v. Montage Resources Corporation, et al., No. 1:20-cv-01324-UNA (D. Del.); Gordon v. Montage Resources

Corporation, et al. (Supreme Court of the State of New York, County of New York); and Widrick v. Montage Resources Corporation, et al. No. 1:20-cv-09101 (S.D.N.Y.).

The complaints name as defendants the Company and the Company’s directors, and two of the six complaints also name Southwestern as defendant. The complaints generally assert claims under Sections 14(a) and 20(a) of the Exchange Act, alleging, among other things, that the registration statement on Form S-4, originally filed on September 16, 2020, omits material information with respect to the merger and/or assert claims for breach of fiduciary duty under Delaware law against the Company and its directors. The complaints generally seek to enjoin the merger and seek rescission and rescissory damages, including attorneys’ fees, among other relief. The Company and Southwestern believe the claims are meritless.

(b) Environmental Matters

The Company is subject to numerous laws and regulations governing the discharge of materials into the environment or otherwise relating to environmental protection. To the extent laws are enacted or other governmental action is taken that restricts drilling or imposes environmental protection requirements that result in increased costs to the oil and natural gas industry in general, the business and prospects of the Company could be adversely affected.

In March 2020, the Company completed the renegotiation of certain existing gas gathering contracts with a midstream service provider into a single new consolidated gas gathering agreement. Revised commitments under the new consolidated gas gathering agreement (in thousands) are included in the table below:

	Firm transportation⁽ⁱ⁾		Gas processing, gathering, and compression services⁽ⁱⁱ⁾		Total
Year Ending December 31:
Remainder of 2020	$	25,025	$	11,132	$	36,157
2021		99,828		44,801		144,629
2022		99,828		49,404		149,232
2023		99,828		52,342		152,170
2024		100,101		52,972		153,073
Thereafter		722,369		303,890		1,026,259
Total	$	1,146,979	$	514,541	$	1,661,520

(i)

Firm transportation -The Company has entered into firm transportation agreements with various pipelines in order to facilitate the delivery of production to market. These contracts commit the Company to transport minimum daily natural gas volumes at a negotiated rate or pay for any deficiencies at a specified reservation fee rate. The amounts in this table represent the minimum daily volumes at the reservation fee rates. The values in the table represent the gross amounts that the Company is committed to pay and do not deduct amounts that other parties are responsible for as a result of cost sharing arrangements with working interest partners. The Company records in its Condensed Consolidated Financial Statements the Company’s proportionate share of costs based on its working interest.

(ii)

Gas processing, gathering, and compression services -Contractual commitments for gas processing, gathering and compression service agreements represent minimum commitments under long-term gas processing and gathering agreements as well as various gas compression agreements. The values in the table represent the gross amounts that the Company is committed to pay and do not deduct amounts that other parties are responsible for as a result of cost sharing arrangements with working interest partners. The Company records in its Condensed Consolidated Financial Statements its proportionate share of costs based on the Company’s working interest.