Commitments And Contingencies

12 Months Ended

Dec. 31, 2019

Commitments and Contingencies Disclosure [Abstract]

Severance agreements. The Company has entered into severance and change in control agreements with its officers and certain key employees. The current annual salaries for the officers and key employees covered under such agreements total $15 million.

Indemnifications. The Company has agreed to indemnify its directors and certain of its officers, employees and agents with respect to claims and damages arising from acts or omissions taken in such capacity, as well as with respect to certain litigation.

Legal actions. The Company is party to various proceedings and claims incidental to its business. While many of these matters involve inherent uncertainty, the Company believes that the amount of the liability, if any, ultimately incurred with respect to these proceedings and claims will not have a material adverse effect on the Company's consolidated financial position as a whole or on its liquidity, capital resources or future annual results of operations. The Company records reserves for contingencies when information available indicates that a loss is probable and the amount of the loss can be reasonably estimated.

Environmental. Environmental expenditures that relate to an existing condition caused by past operations and that have no future economic benefits are expensed. Environmental expenditures that extend the life of the related property or mitigate or prevent future environmental contamination are capitalized. Liabilities for expenditures that will not qualify for capitalization are recorded when environmental assessment and/or remediation is probable and the costs can be reasonably estimated. Such liabilities are undiscounted unless the timing of cash payments for the liability is fixed or reliably determinable. Environmental liabilities normally involve estimates that are subject to revision until settlement or remediation occurs.

Obligations following divestitures. In connection with its divestiture transactions, the Company may retain certain liabilities and provide the purchaser certain indemnifications, subject to defined limitations, which may apply to identified preclosing matters, including matters of litigation, environmental contingencies, royalty and income taxes. Also associated with its divestiture transactions, the Company has issued and received guarantees to facilitate the transfer of contractual obligations, such as firm transportation agreements or gathering and processing arrangements. The Company does not recognize a liability if the fair value of the obligation is immaterial or the likelihood of making payments under these guarantees is remote.

South Texas Divestiture. In conjunction with the South Texas Divestiture, the Company transferred its long-term midstream agreements and associated MVC's to the buyer. However, the Company retained the obligation to pay 100 percent of any deficiency fees associated with the MVC's from January 2019 through July 2022. The buyer is required to reimburse the Company for 18 percent of the deficiency fees paid by the Company from January 2019 through July 2022; such reimbursement will be paid by the buyer in installments beginning in 2023 through 2025. Assuming 100 percent of the MVC's are paid as deficiency fees, the maximum amount of future payments for this obligation would be approximately $620 million as of December 31, 2019. The Company's estimated deficiency fee obligation as of December 31, 2019 is $394 million, of which $153 million is included in other current liabilities in the consolidated balance sheets. The corresponding estimated deficiency fee receivable from the buyer of $69 million is included in noncurrent other assets in the consolidated balance sheets. The Company has received credit support for the deficiency fee receivable and contingent consideration of up to $325 million.

Raton transportation commitments. In July 2018, the Company completed the sale of its gas field assets in the Raton Basin to an unaffiliated third party and transferred certain gas transportation commitments, which extend through 2032, to the buyer for which the Company has provided a guarantee. Assuming 100 percent of the remaining commitments are paid by the Company under its guarantee, the maximum amount of future payments would be approximately $90 million as of December 31, 2019. The Company has received credit support for the commitments of up to $50 million. During 2019, the Company paid $12 million in gas transportation fees associated with the transferred commitment and was fully reimbursed.

West Eagle Ford Shale commitments. In April 2018, the Company completed the sale of its West Eagle Ford Shale gas and liquids field to an unaffiliated third party and transferred certain gas and liquids transportation commitments, which extend through 2022, to the buyer for which the Company has provided a guarantee. Assuming 100 percent of the remaining commitments are paid by the Company under its guarantee, the maximum amount of future payments would be approximately $20 million as of December 31, 2019. The Company has received credit support for the commitments of up to $19 million.

Certain contractual obligations were retained by the Company after the South Texas Divestiture, the divestiture of the Company's gas field assets in the Raton Basin, the divestiture of the Company's pressure pumping assets and the decommissioning of the Company's sand mine operations in Brady, Texas. These contracts were primarily related to firm transportation and storage agreements in which the Company is unlikely to realize any benefit. The estimated obligations are included in other current or noncurrent liabilities in the consolidated balance sheets.

The changes in contract obligations are as follows:


	Year Ended December 31, 2019
	(in millions)
Beginning contract obligations	$111
Additions (a)	400
Liabilities settled	(51)
Accretion of discount	10
Changes in estimate (b)	(2)
Ending contract obligations	$	468

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(a)Additions include a $348 million deficiency fee obligation related to the South Texas Divestiture, $49 million of South Texas accrued deficiency fees from January 2019 through April 2019, $2 million of sand storage deficiencies associated with the sale of pressure pumping assets and $1 million related to sand mine decommissioning.

(b)Represents the difference between estimated and actual liabilities settled.

Texas Commission on Environmental Quality ("TCEQ") enforcement action. The TCEQ pursued an enforcement action against the Company, including monetary sanctions, due to various alleged air emissions occurring during the Company's ownership in 2016 and 2017 of the Fain gas plant in the West Panhandle region of Texas, which was sold during 2018. Effective as of October 25, 2019, the Company and the TCEQ entered into an agreed order that provides for the Company making a final penalty payment of $188,400. By letter dated November 1, 2019, the Company was informed by the TCEQ that it had fulfilled the requirements of the order.

Firm commitments. The Company from time to time enters into, and is a party to, take-or-pay agreements, which include contractual commitments to purchase sand and water for use in the Company's drilling operations and contractual commitments with midstream service companies and pipeline carriers for future gathering, processing, transportation, fractionation and storage. These commitments are normal and customary for the Company's business activities. Certain future minimum gathering, processing, transportation, fractionation and storage fees are based upon rates and tariffs that are subject to change over the terms of the commitments.

Minimum firm commitments are as follows:


	As of December 31, 2019
	Firm Commitments
	(in millions)
2020	$	532
2021	534
2022	471
2023	407
2024	412
Thereafter	1,784
Total minimum firm commitments	$	4,140

Gas delivery commitments. The Company has contracts that require delivery of fixed volumes of gas. The Company intends to fulfill its short-term and long-term obligations with production or from purchases of third party volumes.

Delivery commitments for gas are as follows:


			As of December 31, 2019
			(MMBtu per day)
2020			196,557
2021			175,000
2022			175,000
2023			175,000
2024			150,137
Thereafter			156,164
Total gas delivery commitments			1,027,858