Office Lease

The Company’s corporate headquarters are located at One Lincoln Centre, 5400 LBJ Freeway, Suite 1500, Dallas, Texas 75240. In April 2013, the Company entered into the fifth amendment to its office lease agreement. This amendment increased the square footage of its corporate headquarters to 40,071 square feet effective July 1, 2013. The lease expires on June 30, 2022.

The effective base rent over the term of the lease extension is $20.28 per square foot per year. The base rate escalates several times during the course of the lease, specifically in July 2015, July 2017, July 2019 and July 2020; however, the Company recognizes rent expense ratably over the term of the lease. During the year ended December 31, 2014, the Company also entered into a short-term lease for additional office space in its corporate headquarters; this lease expires in April 2015.

From time to time, the Company also enters into leases for field offices in locations where we have active field operations. These leases are typically for terms of less than five years and are not considered principal properties. None of the field office locations discussed above are considered principal properties.

The following is a schedule of future minimum lease payments required under all office lease agreements as of December 31, 2014 (in thousands).



Year Ending December 31,	Amount
2015	$	971
2016	885
2017	905
2018	927
2019	941
Thereafter	2,418
Total	$	7,047

Rent expense, including fees for operating expenses and consumption of electricity, was $0.9 million, $0.8 million and $0.6 million for 2014, 2013 and 2012, respectively.

Natural Gas and NGL Processing and Transportation Commitments

Effective September 1, 2012, the Company entered into a firm five-year natural gas processing and transportation agreement whereby the Company committed to transport the anticipated natural gas production from a significant portion of its Eagle Ford acreage in South Texas through the counterparty’s system for processing at the counterparty’s facilities. The agreement also includes firm transportation of the natural gas liquids extracted at the counterparty’s processing plant downstream for fractionation. After processing, the residue natural gas is purchased by the counterparty at the tailgate of its processing plant and further transported under its natural gas transportation agreements. The arrangement contains fixed processing and liquids transportation and fractionation fees, and the revenue the Company receives varies with the quality of natural gas transported to the processing facilities and the contract period.

Under this agreement, if the Company does not meet 80% of the maximum thermal quantity transportation and processing commitments in a contract year, it will be required to pay a deficiency fee per MMBtu of natural gas deficiency. Any quantity in excess of the maximum MMBtu delivered in a contract year can be carried over to the next contract year for purposes of calculating the natural gas deficiency. During certain prior periods, the Company had an immaterial natural gas deficiency, and the counterparty to this agreement waived the deficiency fee. The Company paid approximately $5.8 million and $5.3 million in processing and transportation fees under this agreement during the years ended December 31, 2014 and 2013, respectively.

The aggregate undiscounted minimum commitments under this agreement at December 31, 2014 are as follows (in thousands).




Year Ending December 31,	Amount
2015	$	2,992
2016	1,801
2017	1,195
Total	$	5,988

Other Commitments

The Company does not own or operate its own drilling rigs, but instead enters into contracts with third parties for such drilling rigs. These contracts establish daily rates for the drilling rigs and the term of the Company’s commitment for the drilling services to be provided, which have typically been for one year or less, although in 2014, the Company entered into longer-term contracts in order to secure new drilling rigs equipped with the latest technology in plays that were experiencing heavy demand for drilling rigs. The Company would incur a termination obligation if the Company elected to terminate a contract and if the drilling contractor were unable to secure replacement work for the contracted drilling rigs or if the drilling contractor were unable to secure work for the contracted drilling rigs at the same daily rates being charged to the Company prior to the end of their respective contract terms. The Company’s undiscounted minimum outstanding aggregate termination obligations under its drilling rig contracts were approximately $50.4 million at December 31, 2014.

The Company entered into an agreement with a third party for the engineering, procurement, construction and installation of a natural gas processing plant in Loving County, Texas in 2014. This plant is expected to process a portion of the Company’s natural gas produced from certain of its wells in the Permian Basin, as well as third-party natural gas once the plant is completed. Total commitments under this contract are $17.0 million and the Company had made payments totaling $2.1 million during the year ended December 31, 2014. The plant is scheduled to be completed and placed in service in the third quarter of 2015.

At December 31, 2014, the Company had outstanding commitments to participate in the drilling and completion of various non-operated wells. If all of these wells are drilled and completed as proposed, the Company’s minimum outstanding aggregate commitments for its participation in these non-operated wells were approximately $21.0 million at December 31, 2014. The Company expects these costs to be incurred within the next year.

Legal Proceedings

The Company is a defendant in several lawsuits encountered in the ordinary course of its business. While the ultimate outcome and impact to the Company cannot be predicted with certainty, in the opinion of management, it is remote that these lawsuits will have a material adverse impact on the Company’s financial condition, results of operations or cash flows.