Commitments and Contingencies

12 Months Ended

Dec. 31, 2013

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 contracts of $65.7 million, gathering, processing, and transportation through-put commitments of $1.1 billion, office leases, including maintenance, of $69.4 million, and other miscellaneous contracts and leases of $7.6 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)
2014	$	179,118
2015	147,119
2016	144,438
2017	132,559
2018	128,418
Thereafter	481,947
Total	$	1,213,599

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 1,807 Bcf of natural gas and 53 MMBbl of oil. These contracts expire at various dates through 2023 and the total amount of the commitment is approximately $1.1 billion. The Company will be required to make periodic deficiency payments for any shortfalls in delivering the minimum volume commitments. As of the filing date of this report, the Company does not expect to incur any material shortfalls.

The Company leases office space under various operating leases with terms extending as far as May 31, 2024. During the third quarter of 2013, the Company entered into an office lease with an initial term of 12 years and minimum lease payments of $12.9 million over the term beginning on the commencement date, which is anticipated to be in the second quarter of 2014. Rent expense for 2013, 2012, and 2011, was $5.7 million, $5.4 million, and $3.7 million, respectively. The Company also leases office equipment under various operating leases.

In addition to the amounts in the above table, the Company has committed to pay its portion of the development of infrastructure in its outside operated Eagle Ford shale play. The system owners unanimously approved budgeted costs for 2014, of which the Company is committed to pay approximately $33.0 million for the upcoming year.

Contingencies

The Company is subject to litigation and claims arising 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 the cash flows of the Company.

On January 27, 2011, Chieftain filed a Class Action Petition against the Company in the District Court of Beaver County, Oklahoma, claiming damages related to royalty valuation on all of the Company's Oklahoma wells. These claims include breach of contract, breach of fiduciary duty, fraud, unjust enrichment, tortious breach of contract, conspiracy, and conversion, based generally on asserted improper deduction of post-production costs. The Company removed this lawsuit to the United States District Court for the Western District of Oklahoma on February 22, 2011. The Company responded to the petition and denied the allegations. The district court did not rule on Chieftain's motion to certify the putative class, and stayed all proceedings until the United States Court of Appeals for the Tenth Circuit issues its rulings on class certification in two similar royalty class action lawsuits. On July 9, 2013, the Tenth Circuit issued its opinions, reversing the trial courts' grant of class certification and remanding the matters to the trial courts for those cases. The district court presiding over the Company's case subsequently lifted its stay, and the Company expects Chieftain to file a new motion for class certification in the first half of 2015.

This case involves complex legal issues and uncertainties; a potentially large class of plaintiffs, and a large number of related producing properties, lease agreements and wells; and an alleged class period commencing in 1988 and spanning the entire producing life of the wells. Because the proceedings are in the early stages, with substantive discovery yet to be conducted, the Company is unable to estimate what impact, if any, the action will have on its financial condition, results of operations or cash flows. The Company is still evaluating the claims, but believes that it has properly paid royalties under Oklahoma law and has and will continue to vigorously defend this case. On December 30, 2013, the Company sold a substantial portion of its assets that were subject to this matter, and the buyer assumed any such liabilities related to such properties.

In an unrelated matter, as of and for the year ended December 31, 2013, other operating expenses includes $23.1 million related to an agreed clarification concerning royalty payment provisions of various leases on certain South Texas & Gulf Coast acreage. As of December 31, 2013, $9.6 million is included in accounts payable and accrued expenses as $13.5 million was paid in 2013.