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Commitments and Contingencies
9 Months Ended
Sep. 30, 2016
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies
Commitments and Contingencies
Litigation
We are involved in various legal proceedings that arise from time to time in the ordinary course of doing business and believe that adequate reserves have been established for any probable losses. We do not believe that the outcome of any of these proceedings should have a significant adverse effect on our financial position, long-term results of operations or cash flows. However, it is possible that charges related to these matters could be significant to our results or cash flows in any one accounting period.
On October 4, 2014, James Huffman, a former director and CEO of CREDO Petroleum Corporation (Credo), which we acquired in 2012 and is now known as Forestar Petroleum Corporation, filed Huffman vs. Forestar Petroleum Corporation, Case Number 14CV33811, Civ. Div., Dist. Ct., City and County of Denver, Colorado. Huffman claimed entitlement under a Credo employee compensation program to overriding royalty interests (ORRI) on nearly all North Dakota leases, none of which were assigned by Credo to Huffman prior to his retirement, and on several Kansas and Nebraska leases. On August 11, 2016, we agreed to pay Huffman $150,000 in settlement of all claims except those involving North Dakota assets. Following a jury trial, on September 23, 2016, an adverse verdict was received in the amount of $923,899 for breach of contract related to the North Dakota claims. At third quarter-end 2016, we have accrued $1,100,000 for damages, prejudgment interest and costs. We intend to contest the verdict, and judgment has not been entered by the court because non-jury claims by both parties remain outstanding. The remaining claims have not been adjudicated and we are unable to conclude whether loss on these claims is probable or remote. We are unable to estimate a possible loss or range of loss on the remaining claims because (a) the parties have not fully briefed their positions or applicable law, (b) Huffman did not seek monetary damages in his trial pleadings, and (c) our claim for unjust enrichment would result, if we prevail, in reduction or elimination of damages already accrued and no additional damages.
Environmental
We have asset retirement obligations related to the abandonment and site restoration requirements that result from the acquisition, construction and development of oil and gas properties. We record the fair value of a liability for an asset retirement obligation in the period in which it is incurred and a corresponding increase in the carrying amount of the related long-lived asset. Accretion expense related to the asset retirement obligation and depletion expense related to capitalized asset retirement cost is included in cost of oil and gas producing activities of discontinued operations. At third quarter-end 2016 and year-end 2015, our estimated asset retirement obligation was $1,256,000 and $1,758,000, of which $1,155,000 and $1,667,000 is included in liabilities of discontinued operations and the remaining balance in other liabilities.
Non-Core Assets Restructuring Costs
In connection with key initiatives to reduce costs across our entire organization and divest non-core assets, in first nine months 2016, we incurred and paid severance costs related to workforce reductions of $1,422,000 in our real estate segment, $164,000 in our other segment and $486,000 in unallocated general and administrative expense. In addition, we offered retention bonuses to certain key personnel provided they remained our employees through completion of sale transactions. We are expensing retention bonus costs over the estimated retention period. These restructuring costs are included in other operating expense.
The following table summarizes activity related to liabilities associated with our restructuring activities for first nine months 2016:
 
Severance Costs
 
Retention Bonuses
 
Total
 
(In thousands)
Balance at year-end 2015
$
(1,049
)
 
$

 
$
(1,049
)
Additions
(2,072
)
 
(832
)
 
(2,904
)
Payments
3,121

 
792

 
3,913

Balance at third quarter-end 2016
$

 
$
(40
)
 
$
(40
)