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Commitments and Contingencies
6 Months Ended
Jun. 30, 2015
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies
Commitments and Contingencies
Drilling and Completion Commitments 
As of June 30, 2015, we had contractual commitments for two drilling rigs with terms expiring in September 2015 and February 2016, respectively. The minimum commitment under these agreements is $7.0 million for the second half of 2015 and $1.1 million in 2016. In addition, we have a commitment to purchase certain coil tubing services that expires in December 2015. The minimum commitment for the remaining two quarters of 2015 under this agreement is $7.4 million. The drilling rig and coil tubing services agreements include early termination provisions that would require us to pay penalties if we terminate the agreements prior to the end of their scheduled terms. The amount of penalty is based on the number of days remaining in the contractual term. As of June 30, 2015, the penalty amount would have been $13.3 million had we terminated those agreements on that date.
Firm Transportation Commitments
We have entered into contracts for firm transportation capacity rights for specified volumes per day on various pipeline systems with remaining terms that range from less than one to 13 years. The contracts require us to pay transportation demand charges regardless of the amount of pipeline capacity we use. The minimum commitment under these agreements is $1.0 million for the second half of 2015 and approximately $1.1 million per year through 2028. We may sell excess capacity to third parties at our discretion.
Gathering and Intermediate Transportation Commitments
We have entered into a long-term agreement for natural gas gathering, compression and gas lift services for a substantial portion of our natural gas 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 production for the first three years of the term. The minimum fee requirement under this agreement is $2.1 million for the second half of 2015 and $5.0 million in 2016.
We have also entered into long-term agreements for gathering and intermediate pipeline transportation services for a substantial portion of our crude oil and condensate production in the South Texas region. Our payment obligations with respect to these services will begin when construction of the gathering and transportation system is completed, which is expected to be in the fourth quarter of 2015. The agreements also require us to commit certain minimum volumes of crude oil production for the first ten years of the agreements terms, which will result in minimum fee requirements of approximately $13.7 million on an annual basis.
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 that remained outstanding as of June 30, 2015. In March 2015, we established an additional $0.3 million reserve for litigation attributable to certain properties that we previously sold. This matter was settled in May 2015 with a cash payment of the amount reserved. As of June 30, 2015, we also had AROs of approximately $6.2 million attributable to the plugging of abandoned wells.