Commitments and Contingencies

9 Months Ended

Sep. 30, 2014

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Legal Proceedings

SWR is a defendant in a suit filed in April 2011 in the Circuit Court of Union County, Arkansas where the plaintiffs initially sought in excess of $8 million for the costs of environmental remediation to a lease on which operations were commenced in the 1930s. In June 2013, the plaintiffs, SWR and the remaining defendants agreed to a settlement of $0.8 million, of which SWR will pay $0.7 million. To accomplish the settlement, the case has been converted to a class action, and each member of the class will be offered the right to either participate or opt out of the class and continue a separate action for damages. If more than 25% of the plaintiffs elect to opt out of the settlement, SWR has the right to terminate the settlement. Any plaintiffs opting out will be subject to all previous rulings of the court, including an order dismissing a significant number of the plaintiffs’ claims on the basis that such claims were time barred. SWR believes that the number of plaintiffs opting out of the settlement, if any, will be insignificant. A loss on settlement of $0.7 million was recorded in June 2013 in connection with this proposed settlement. Settlement documents were agreed to and the court entered an order of settlement. A fairness hearing is set for December 19, 2014.

In February 2012, BMT O&G TX, L.P. filed a suit in the 143rd Judicial District in Reeves County, Texas to terminate a lease under our farm-in agreement with Chesapeake Exploration, L.L.C. (“Chesapeake”). Plaintiffs are the lessors and claim a breach of the lease which they allege gives rise to termination of the lease. CWEI denies a breach and argues in the alternative that (i) any breach was cured in accordance with the lease and (ii) a breach will not give rise to lease termination. In October 2013, a judge ruled that CWEI and Chesapeake are jointly and severally liable for damages to plaintiffs in the amount of approximately $2.9 million and attorney fees of $0.8 million. A loss of $1.4 million was recorded in December 2013 in connection with the judgment. CWEI is appealing the judgment.

We are also a defendant in several other lawsuits that have arisen in the ordinary course of business. While the outcome of these lawsuits cannot be predicted with certainty, management does not expect any of these to have a material adverse effect on our consolidated financial condition or results of operations.