Commitments and Contingencies

3 Months Ended

Mar. 31, 2014

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Drilling and Completion Commitments

We have agreements to purchase oil and gas well drilling and well completion services from third parties with remaining terms of up to 14 months. The well drilling agreements include early termination provisions that would require us to pay penalties if we terminate the agreements prior to the end of their original terms. The amount of penalty is based on the number of days remaining in the contractual term. As of March 31, 2014, the penalty amount would have been $17.3 million if we had terminated our agreements on that date.

Other Commitments

We have entered into contracts that provide firm transportation capacity rights for specified volumes per day on various pipeline systems with terms that range from 1 to 15 years. The contracts require us to pay transportation demand charges regardless of the amount of pipeline capacity we use. We may sell excess capacity to third parties at our discretion.

As discussed in Note 3, we entered into a long-term agreement that provides natural gas gathering and compression services for a substantial portion of our natural gas and NGL production in the South Texas region through 2038. The agreement requires us to make certain minimum fee payments regardless of the volume of natural gas and NGL production for the first three years of the term. The minimum fee requirements for 2014 through 2016 are $3.7 million, $4.2 million and $5.0 million, respectively.

Legal and Regulatory

We are involved, from time to time, in various legal proceedings arising in the ordinary course of business. While the ultimate results of these proceedings cannot be predicted with certainty, our management believes that these claims will not have a material effect on our financial position, results of operations or cash flows. During 2010, we established a $0.9 million reserve for a litigation matter pertaining to certain properties that remains outstanding as of March 31, 2014. In addition to the reserve for litigation, we maintain a suspense account which includes approximately $1.8 million representing the excess of revenues received over costs incurred attributable to these properties. As discussed in Note 3, we are involved in an arbitration with MHR in connection with our EF Acquisition. As of March 31, 2014, we also have AROs of approximately $6.5 million attributable to the plugging of abandoned wells.