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Commitments and Contingencies
12 Months Ended
Dec. 31, 2015
Commitements And Contingencies Disclosures [Abstract]  
COMMITMENTS AND CONTINGENCIES

11. COMMITMENTS AND CONTINGENCIES:

Outstanding debt and interest payments. Continued low oil and natural gas prices during 2015 have had a significant adverse impact on our business, and, as a result of our financial condition, substantial doubt exists that we will be able to continue as a going concern. As a result, we have reclassified our total outstanding debt as short-term.

Our ability to continue as a going concern is dependent on many factors, including, among other things, our ability to comply with the covenants in our existing debt agreements and amend or replace our debt agreements as they mature.  Please refer to Note 1 for further discussion.

A failure by us to comply with our financial covenants or to comply with the other restrictions in our financing agreements may result in reduced borrowing capacity or an event of a default, causing our debt obligations under such financing agreements (and any other indebtedness or contractual obligations to the extent linked to it by reason of cross-default or cross-acceleration provisions) to potentially become immediately due and payable.

We cannot provide any assurances that we will be able to comply with the covenants or to make satisfactory alternative arrangements in the event we cannot do so. If satisfactory alternative arrangements are made, the total interest expense associated with our total outstanding debt is approximately $906.6 million at December 31, 2015; ($168.6 million in 2016; $287.6 million in total for 2017 and 2018; $184.5 million in total for 2019 and 2020; and $265.9 million due beyond five years.)

Transportation contract.  The Company is an anchor shipper on REX securing pipeline infrastructure providing sufficient capacity to transport a portion of its natural gas production away from southwest Wyoming and to provide for reasonable basis differentials for its natural gas in the future. REX begins at the Opal Processing Plant in southwest Wyoming and traverses Wyoming and several other states to an ultimate terminus in eastern Ohio. The Company’s commitment involves a capacity of 200 MMMBtu per day of natural gas through November 2019. During the first quarter of 2009, the Company entered into agreements to secure an additional capacity of 50 MMMBtu per day on the REX pipeline system, beginning in January 2012 through December 2018.

The Company is obligated to pay REX certain demand charges related to its rights to hold this firm transportation capacity as an anchor shipper. The Company has the right, but not the obligation, to deliver its natural gas production into the REX pipeline, but has an obligation to pay reservation charges to REX in either event. On February 25, 2016, we received a letter from REX asserting that we were in default of the obligations under our transportation agreement for failing to provide adequate assurance of performance and for failing to timely pay invoice for transportation services provided by REX during January 2016. The letter also notified us that, according to REX, unless we remedy the alleged defaults of our obligations before the end of the 30-day notice period provided in the tariff, our transportation agreement will terminate automatically at the end of the notice period. Any termination of our transportation agreement on REX would not have a material adverse effect on our ability to market our production.

The Company currently projects that demand charges related to the remaining term of the contract will total approximately $368.1 million.

Operating lease. During December 2012, the Company sold its system of pipelines and central gathering facilities (the “Pinedale LGS”) and certain associated real property rights in the Pinedale Anticline in Wyoming and entered into a long-term, triple net lease agreement (the “Pinedale Lease Agreement”) relating to the use of the Pinedale LGS. The Pinedale Lease Agreement provides for an initial term of 15 years and potential successive renewal terms of 5 years or 75% of the then remaining useful life of the Pinedale LGS at the sole discretion of the Company. Annual rent for the initial term under the Pinedale Lease Agreement is $20.0 million (as adjusted annually for changes based on the consumer price index) and may increase if certain volume thresholds are exceeded. The lease is classified as an operating lease. The Company currently projects that lease payments related to the Pinedale Lease Agreement will total approximately $248.2 million.

The audit report we received with respect to our year-end 2015 consolidated financial statements contains an explanatory paragraph expressing uncertainty as to our ability to continue as a “going concern.” Our Credit Agreement requires us to deliver audited, consolidated financial statements without a “going concern” or like qualification or exception. As a result, we will be in default under our Credit Agreement on March 15, 2016 when we deliver our financial statements to the lenders under the Credit Agreement. Our failure to obtain a waiver of this requirement under the Credit Agreement within the applicable grace period could result in an acceleration of all of our outstanding debt obligations and the potential termination of the Pinedale Lease Agreement.

All of the Company’s lease obligations are related to leases that are classified as operating leases.  These leases contain certain provisions that could result in accelerated lease payments.  The Company has considered the effect of these provisions on minimum lease payments in its lease classification analysis and has determined that the default provisions do not impact classification of any the Company’s operating leases.

Office space lease.  The Company maintains office space in Colorado, Texas, Wyoming and Utah with total remaining commitments for office leases of $7.8 million at December 31, 2015; ($1.4 million in 2016; $1.4 million in 2017; $1.3 million in 2018; $1.2 million in 2019; and $1.0 million in 2020 with the remainder due beyond five years).

During the years ended December 31, 2015, 2014 and 2013, the Company recognized expense associated with its office leases in the amount of $1.3 million, $1.0 million, and $1.0 million, respectively.

Delivery Commitments. With respect to the Company’s natural gas production, from time to time the Company enters into transactions to deliver specified quantities of gas to its customers. As of February 9, 2016, the Company has long-term natural gas delivery commitments of 5.1 MMMBtu in 2016 and 13.5 MMMBtu in 2017 under existing agreements. As of February 9, 2016, the Company has long-term crude oil delivery commitments of 3.4 MMBbls in 2016, 2.8 MMBbls in 2017, 1.1 MMBbls in 2018 and 0.2 MMBbls in 2019 under existing agreements. None of these commitments require the Company to deliver gas or oil produced specifically from any of the Company’s properties, and all of these commitments are priced on a floating basis with reference to an index price. In addition, none of the Company’s reserves are subject to any priorities or curtailments that may affect quantities delivered to its customers, any priority allocations or price limitations imposed by federal or state regulatory agencies or any other factors beyond the Company’s control that may affect its ability to meet its contractual obligations other than those discussed in Item 1A. “Risk Factors”. If for some reason our production is not sufficient to satisfy these commitments, subject to the availability of capital, we could purchase volumes in the market or make other arrangements to satisfy the commitments.

Other.  The Company is currently involved in various routine disputes and allegations incidental to its business operations. While it is not possible to determine the ultimate disposition of these matters, management, after consultation with legal counsel, is of the opinion that the final resolution of all such currently pending or threatened litigation is not likely to have a material adverse effect on the consolidated financial position, results of operations or cash flows of the Company.