Commitments and Contingencies

6 Months Ended

Jun. 30, 2014

Commitments and Contingencies

Commitments and Contingencies

13. Commitments and Contingencies

Contractual Obligations

At June 30, 2014, contractual obligations for drilling contracts, long-term operating leases and seismic contracts are as follows (in thousands):

	Total		2014		2015		2016		2017 and beyond
Drilling contracts	$	10,110	$	10,110	$	—	$	—	$	—
Non-cancellable office lease commitments	10,239		918		1,858		1,878		5,585
Seismic contracts	3,192		3,192		—		—		—
Net minimum commitments	$	23,541	$	14,220	$	1,858	$	1,878	$	5,585

For the three months ended June 30, 2014 and 2013, the Company expensed $0.7 million and $0.5 million, respectively, for office rent. For the six months ended June 30, 2014 and 2013, the Company expensed $1.2 million and $0.9 million, respectively, for office rent.

In addition to the commitments noted in the above table, the Company is party to a gas transportation, gathering and processing contract (as amended and effective June 1, 2013) in the Mississippian Lime region, which includes certain minimum natural gas and NGL volume commitments. To the extent the Company does not deliver natural gas volumes in sufficient quantities to generate, when processed, the minimum levels of recovered NGL, the Company would be required to reimburse the counterparty an amount equal to the sum of the monthly shortfall, if any, multiplied by a fee of roughly $0.06 to $0.125 per gallon (subject to annual escalation). The NGL volume commitments range from 2,800 Bbls to 5,460 Bbls per day over the remaining term of the contract. Additionally, the Company is obligated to deliver a total of 38,100,000 MMBtus and 76,200,000 MMBtus during the first 30 months and 60 months of the contract, respectively. During the first 30 months, any shortfall in delivered volumes would result in a payment to the counterparty equal to the shortfall amount multiplied by a fee of approximately $0.36 per MMBtu. During the first 60 months, any shortfall in delivered volumes would result in a payment to the counterparty equal to the shortfall amount multiplied by a fee of approximately $0.36 per MMBtu, provided that the Company would receive volumetric credit for any deficiency payment made after the initial 30 months. The Company is currently delivering at least the minimum volumes required under these contractual provisions and does not expect to incur any future volumetric shortfall payments during the term of this contract.

Commitments related to AROs are not included in the table above.

Litigation

The Company is involved in disputes or legal actions arising in the ordinary course of its business. Currently, it is not party to any legal proceedings that the Company believes, individually or in the aggregate, are reasonably expected to have a material adverse effect on its financial position, results of operations, or cash flows.