Note 6 – Commitments and Contingencies

Commitments

The Company has entered into various agreements, which include drilling rig contracts of $37.8 million, gathering, processing, transportation throughput, and delivery commitments of $463.4 million, office leases, including maintenance, of $43.3 million, and other miscellaneous contracts and leases of $30.2 million. The annual minimum payments for the next five years and total minimum payments thereafter are presented below:



Years Ending December 31,	Amount (in thousands)
2018	$	113,774
2019	112,860
2020	111,107
2021	102,606
2022	72,073
Thereafter	62,245
Total	$	574,665

Subsequent to December 31, 2017, the Company entered into a fixed price contract to purchase electricity through 2027 for a total of $27.9 million. As of the filing of this report, the Company expects to meet this purchase commitment.

Drilling Contracts

The Company has several drilling rig contracts in place to facilitate drilling plans. Early termination of these rig contracts as of December 31, 2017, would have resulted in termination penalties of $27.7 million, which would be in lieu of paying the remaining drilling commitments of $37.8 million included in the table above. For the years ended December 31, 2016, and 2015, the Company incurred $8.7 million and $13.7 million, respectively, of expenses related to the early termination of drilling rig contracts or fees incurred for rigs placed on standby, which are recorded in the other operating expenses line item in the accompanying statements of operations. No such expenses were recorded by the Company for the year ended December 31, 2017.

Pipeline Transportation Commitments

The Company has gathering, processing, transportation throughput, and delivery commitments with various third-parties that require delivery of a minimum amount of oil, gas, and produced water. As of December 31, 2017, the Company has commitments to deliver a minimum of 19 MMBbl of oil, 789 Bcf of gas, and 24 MMBbl of produced water through 2028. The Company will be required to make periodic deficiency payments for any shortfalls in delivering the minimum volume commitments under certain agreements. As of December 31, 2017, if the Company fails to deliver any product, as applicable, the aggregate undiscounted deficiency payments total approximately $463.4 million. If a shortfall in the minimum volume commitment for gas is projected, the Company has rights under certain contracts to arrange for third-party gas to be delivered, and such volumes would count toward its minimum volume commitment.

During the first quarter of 2017, the Company completed the divestiture of its outside-operated Eagle Ford shale assets. Upon closing of the sale, the Company is no longer subject to transportation throughput commitments totaling 52 MMBbl of oil, 514 Bcf of gas, and 13 MMBbl of NGLs, or $501.9 million of the potential undiscounted deficiency payments as of December 31, 2016.

As of the filing of this report, the Company does not expect to incur any material shortfalls.

Office Leases

The Company leases office space under various operating leases with terms extending as far as 2026. Rent expense, net of sublease income, for the years ended December 31, 2017, 2016, and 2015, was $4.8 million, $5.2 million, and $6.1 million, respectively. The Company closed its office in Billings, Montana in November 2016 and paid $3.2 million to the lessor to terminate the lease, which is not reflected in the rent expense amount above.

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 is not likely to have a material effect on the results of operations, the financial position, or the cash flows of the Company.