Commitments and Contingencies

9 Months Ended

Sep. 30, 2024

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Note 6 - Commitments and Contingencies

Commitments

Other than those items discussed below, there have been no changes in commitments through the filing of this report that differ materially from those disclosed in the 2023 Form 10-K.

Drilling Rig Service Contracts. During the nine months ended September 30, 2024, the Company entered into new drilling rig contracts. As of September 30, 2024, the Company’s drilling rig commitments totaled $19.2 million under contract terms extending through the second quarter of 2025. If all of the drilling rig contracts were terminated as of September 30, 2024, the Company would avoid a portion of the contractual service commitments; however, the Company would be required to pay $10.4 million in early termination fees. No early termination penalties or standby fees were incurred by the Company during the nine months ended September 30, 2024, and the Company does not expect to incur material penalties with regard to its drilling rig contracts during the remainder of 2024.

Drilling and Completion Commitments. During the nine months ended September 30, 2024, the Company entered into an agreement that includes minimum drilling and completion footage requirements on certain existing leases. If these minimum requirements are not satisfied by March 31, 2026, the Company will be required to pay liquidated damages based on the difference between the actual footage drilled and completed and the minimum requirements. As of September 30, 2024, the liquidated damages could range from zero to a maximum of $55.0 million, with the maximum exposure assuming no additional development activity occurs prior to March 31, 2026. As of the filing of this report, the Company expects to meet its drilling and completion footage obligations under this agreement.

Subsequent Events. As part of the Uinta Basin Acquisition, certain contracts and leases containing both short-term and long-term commitments were assigned to the Company effective as of the closing date of October 1, 2024. The Company is evaluating the minimum commitments, terms and conditions, and operational plans related to activities under these contracts and leases, as well as the expected financial statement impact. Please see Note 11 - Acquisitions for discussion and the definition of the Uinta Basin Acquisition.

Certain contracts assigned to the Company include material, long-term oil gathering, processing, transportation throughput, and delivery commitments with various third-parties, under which the Company would be required to make periodic deficiency payments for any shortfalls in delivering specified minimum volume commitments. As of October 1, 2024, if the Company failed to deliver any product under these contracts, the aggregate undiscounted deficiency payments would total approximately $135.8 million. One of these contracts does not have a minimum volume commitment associated with it, however, as of October 1, 2024, the Company would owe a cancellation fee of $4.9 million if the agreement was terminated.

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. As of the filing of this report, in the opinion of management, the anticipated results of any pending litigation and claims are not expected to have a material effect on the results of operations, the financial position, or the cash flows of the Company.