Note 13—Commitments and Contingencies

Operating Leases and Other Commitments

The following is a schedule of the Company’s future minimum lease payments with commitments that have initial or remaining non-cancelable lease terms in excess of one year as of December 31, 2016:



	Amount
Years ending December 31,	(in thousands)
2017	$	8,147
2018	814
2019	573
2020	134
2021	79
Thereafter	7,226
Total	$	16,973

Financing Obligation

In October 2014, the Company’s gas gathering agreement with PennTex was amended to construct an expansion of the gathering system and a receipt point. The Company reimbursed PennTex for the total cost of the expansion project. The Company paid a minimum fee of $7,000 per day until PennTex recouped the capital outlay for the expansion project. At December 31, 2016, the financing obligation was paid in full. At December 31, 2015, a short-term liability of $2.1 million was in included in Other current liabilities on the consolidated balance sheets. For the periods from October 11, 2016, through December 31, 2016 (Successor) and January 1, 2016, through October 10, 2016 (Predecessor) and for the year ended December 31, 2015, the Company made payments, including interest, of $0.1 million, $2.1 million and $1.7 million, respectively.

Transportation and Gathering Agreement

In December 2015, the Company entered into a transportation and gathering services agreement by which a transporter agreed to construct a crude oil gathering and transportation system capable of transporting crude oil from certain Company wells in Reeves and Ward Counties, Texas to destination points in Crane and Midland, Texas (the “Transportation System”), and the Company agreed to dedicate and ship on the Transportation System all crude oil owned or controlled by the Company from oil and gas leases covering approximately 28,000 gross acres located within a designated area of mutual interest in Reeves and Ward Counties. The agreement has a primary term of 12 years from October 1, 2016, the date the Transportation System was first put into service, and may be extended at the Company’s option for two successive two-year terms and, thereafter, is automatically extended for successive one-year terms unless terminated by the Company or the transporter upon 60 days’ prior notice.

Purchase Agreement

In July 2016, the Company entered into a crude oil purchase agreement by which the Company agreed to sell all of its crude oil production that is produced at receipt points identified in the agreement commencing on the October 1, 2016 in-service date of the Transportation System. The purchaser is obligated to purchase the crude oil at the receipt points identified in the agreement and transport it on the Transportation System. The agreement has an initial term of nine months from October 1, 2016, the date the Transportation System entered commercial service, and evergreen 30-day renewal terms unless terminated by the Company or the purchaser on 30 days’ prior notice. The price received by the Company for the crude oil it sells under the agreement is based generally on NYMEX pricing subject to marketing and other adjustments, and varies depending on whether the oil is transported to Crane or Midland, Texas and on whether the oil is transported before or after the Transportation System is connected to a pipeline in Crane, Texas or a terminal in Midland, Texas.

Drilling Rig Contracts

As of December 31, 2016, the Company has four drilling rigs under contract. All of these contracts expire in 2017.

In light of the low commodity price environment, the Company curtailed its drilling activity during 2015. For the year-ended December 31, 2015, the Company incurred drilling rig termination fees of $2.4 million, which are recorded in the Contract termination and rig stacking line item in the accompanying consolidated and combined statements of operations.

Office Leases

The Company leases office space in Denver, Colorado, Midland, Texas, Sugar Land, Texas, and Pecos, Texas. The Company recognized rent expense of $0.1 million, $0.4 million, $0.4 million and $0.5 million for the periods from October 11, 2016, through December 31, 2016, January 1, 2016, through October 10, 2016, and for the years ended December 31, 2015 and December 31, 2014, respectively.

Contingencies

In the ordinary course of business, the Company may at times be subject to claims and legal actions. Management believes it is remote that the impact of such matters will have a material adverse effect on the Company’s financial position, results of operations or cash flows. Management is unaware of any pending litigation brought against the Company requiring the reserve of a contingent liability as of the date of these consolidated financial statements.