COMMITMENTS AND CONTINGENCIES

9 Months Ended

Sep. 30, 2011

COMMITMENTS AND CONTINGENCIES.

COMMITMENTS AND CONTINGENCIES

8.             COMMITMENTS AND CONTINGENCIES

Legal Proceedings

From time to time, we are involved in litigation relating to claims arising out of our properties or operations or from disputes with vendors in the normal course of business.

As disclosed in our Annual Report on Form 10-K for the year ended December 31, 2010, mineral interest owners in East Texas (Haynesville Shale) filed two causes of action against us on May 26, 2009 and August 26, 2009, respectively, in the District Court for San Augustine County, Texas alleging breach of contract for not paying lease bonuses on certain prospective oil and gas leases that were pursued by our leasing agent but never taken by Crimson.  The damages alleged are currently approximately $3.2 million and we have received approximately $2.0 million in written demands from other mineral interest owners in this area that we believe may contemplate legal proceedings.  As previously noted, we are vigorously defending these lawsuits, and believe we have meritorious defenses.  We do not believe that these claims will have a material adverse effect on our business, financial position, results of operations or cash flows, although we cannot guarantee that a material adverse effect will not occur.

The holders of oil and gas leases in South Louisiana filed suit against Crimson and several co-defendants alleging failure to act as a reasonably prudent operator, failure to explore, waste, breach of contract, etc. in connection with two wells in Jefferson Davis Parish, Louisiana.  Many of the alleged improprieties occurred prior to our ownership of an interest in the wells at issue, although we may have assumed liability otherwise attributable to our predecessors-in-interest through the acquisition documents relating to the acquisition of our interest in these wells.  The damages currently alleged are approximately $15.0 million.  We and our co-defendants are vigorously defending this lawsuit and we believe that we have meritorious defenses.  We have not yet determined to what extent, if any, our insurance carriers will support us in this suit.  We do not believe this suit will have a material adverse effect on our business, financial position, results of operations or cash flows, although we cannot guarantee that a material adverse effect will not occur.