NOTE

Commitments and Contingencies

Leases.

The Company adopted ASC Topic

842,

“Leases” electing the transition method which permits entities to change the date of initial application to the beginning of the year of adoption and to recognize the effects of applying the new standard as a cumulative-effect adjustment to the opening balance of retained earnings. The Company elected this transition approach, however the cumulative impact of adoption in the opening balance of retained earnings as of

January 1, 2020

was

zero

. Therefore, as of

March 31, 2021

and

December 31, 2020

the Company had operating right-of-use assets totaling

$371,000

and

$506,000,

respectively, included in other noncurrent assets and operating lease liabilities totaling

$374,000

and

$508,000,

respectively,

$322,000

and

$430,000,

respectively, of which are included in other current liabilities and

$52,000

and

$78,000,

respectively, are included in other noncurrent liabilities on the accompanying condensed consolidated balance sheets. The Company does

not

currently have any finance right-of-use leases. Maturities of the operating lease obligations are as follows (in thousands):

	March 31, 2021
Remainder of 2021	$	328
2022		53
Total lease payments		381
Less present value discount		(7	)
Present value of lease liabilities	$	374

Legal actions.

From time to time, the Company

may

be a party to various 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 these proceedings and claims will

not

have a material adverse effect on the Company's consolidated financial position as a whole or on its liquidity, capital resources or future annual results of operations. The Company records reserves for contingencies when information available indicates that a loss is probable, and the amount of the loss can be reasonably estimated.

Indemnifications.

The Company has agreed to indemnify its directors, officers and certain employees and agents with respect to claims and damages arising from acts or omissions taken in such capacity, as well as with respect to certain litigation.

Environmental.

Environmental expenditures that relate to an existing condition caused by past operations and that have

future economic benefits are expensed. Environmental expenditures that extend the life of the related property or mitigate or prevent future environmental contamination are capitalized. Liabilities for expenditures that will

not

qualify for capitalization are recorded when environmental assessment and/or remediation is probable, and the costs can be reasonably estimated. Such liabilities are undiscounted unless the timing of cash payments for the liability is fixed or reliably determinable. Environmental liabilities normally involve estimates that are subject to revision until settlement or remediation occurs.

Salt-Water Disposal Commitments.

The Company has committed to deliver a total of

5.5

MMBbl of produced water for disposal with

two

different

third

-party salt-water disposal companies, including

2.5

MMBbl between

September 30, 2020

and

September 30, 2021

and

3.0

MMBbl between

July 24, 2020

and

July 24, 2022.

As of

March 31, 2021,

the Company has delivered approximately

2.1

MMBbl and

1.7

MMBbl, respectively under the

two

agreements. Both agreements require a payment for any volumes

not

delivered should the Company

not

perform under the agreements, indicating a remaining monetary commitment of approximately

$760,000

as of

March 31, 2021.

Given the current production levels coupled with the wells planned to come on production during the remainder of

2021

and in to

2022,

the Company expects to meet the volume commitments under these agreements.