Commitments and Contingencies

12 Months Ended

Dec. 31, 2011

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Note 6 – Commitments and Contingencies

Commitments

The Company has entered into various agreements, which include drilling rig leasing contracts of $143.0 million, gathering, transportation, and processing through-put commitments of $893.6 million, office space leases, including maintenance, of $37.4 million, hydraulic fracturing contracts of $19.2 million, and other miscellaneous contracts and leases of $5.7 million. The annual minimum payments for the next five years and total minimum lease payments thereafter are presented below:

Years Ending December 31,	(in thousands)
2012	$	131,021
2013	99,633
2014	108,629
2015	97,401
2016	100,635
Thereafter	561,642
Total	$	1,098,961

The Company has gathering, processing, and transportation through-put commitments with various parties that require delivery of a fixed determinable quantity of product. The aggregate minimum commitment to deliver is 1,766 Bcf of natural gas and 9 MMBbls of oil. These contracts expire at various dates through 2023 and the total amount of the commitment is $893.6 million. The Company will be required to make periodic deficiency payments for any shortfalls in delivering the minimum volume commitments. The Company expects to fulfill the delivery commitments.

The Company leases office space under various operating leases with terms extending as far as September 30, 2022. Rent expense for 2011, 2010, and 2009 was $3.7 million, $2.7 million, and $2.3 million, respectively. Rent expense for 2009 is net of sub lease rent of $185,000; there is no sublease rent for 2010 or 2011. The Company also leases office equipment under various operating leases.

In addition to the amounts in the above table, the Company entered into a three-year capital project commencing 2011 for the development of infrastructure in the Company's non-operated Eagle Ford shale play. Pursuant to the terms of the agreement for the construction, ownership and operation of the assets, the Company is required to pay its portion of the costs. Based on current estimates, the Company does not expect its costs to exceed $75 million over the duration of the agreement.

Contingencies

The Company is subject to litigation and claims that have arisen in the ordinary course of business. The Company accrues for such items when a liability is both probable and the amount can be reasonably estimated. In the opinion of management, the results of such pending litigation and claims will not have a material effect on the results of operations, the financial position, or cash flows of the Company.

The Company is currently a defendant in litigation where the plaintiffs claim an aggregate overriding royalty interest of 7.46875 percent in production from approximately 22,000 of the Company’s net acres in the Eagle Ford shale play in South Texas. The plaintiffs seek to quiet title to their claimed overriding royalty interest and seek the recovery of unpaid overriding royalty interest proceeds allegedly due. The Texas District Court issued an order granting plaintiffs’ motion for summary judgment, but the Company believes that the summary judgment order is incorrect under the governing agreements and applicable law, and the Company has filed its appeal and will continue to contest the claim. The court entered judgment against all defendants awarding the plaintiffs damages of $5.1 million. If the plaintiffs were to ultimately prevail, the overriding royalty interest would reduce the Company’s net revenue interest in the affected acreage. The Company does not currently believe that an unfavorable ultimate outcome is probable, nor that if the plaintiffs prevail there would be a material effect on the financial position of the Company. Based on the Company’s current view of the facts and circumstances of the case, no accrual has been made for any loss.