Commitments and Contingencies

3 Months Ended

Mar. 31, 2016

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Drilling and Completion Commitments

In March 2016, we terminated our one remaining drilling rig contract and incurred $0.4 million in early termination charges. In September 2015, we renegotiated an existing commitment to purchase certain coiled tubing services at a lower rate and extended the term to June 30, 2016. The minimum commitment remaining under this agreement was $0.6 million as of March 31, 2016. The coiled tubing services agreement includes an early termination provision that would require us to pay penalties equal to the remaining minimum commitment if we terminate the agreement prior to the end of its scheduled term.

Firm Transportation Commitments

We have entered into a contract for firm transportation capacity rights for specified daily volumes on a pipeline system with a remaining term of 13 years. The contract requires us to pay transportation demand charges regardless of the amount of pipeline capacity we use. The minimum commitment under this agreement is $0.8 million for the remaining three quarters of 2016 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 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 2039. The agreement requires us to make certain minimum payments regardless of the volume of natural gas production until December 2016. The minimum fee requirement under this agreement is $3.8 million for the remaining three quarters of 2016.

We also have 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 through 2041. These agreements require us to commit certain minimum volumes of crude oil production for the first ten years of the agreements’ terms, resulting in minimum fee requirements of approximately $12.3 million on an annual basis.

Drilling Carry

In connection with our August 2014 acquisition of undeveloped acreage in the Eagle Ford in Lavaca County, Texas, we committed to providing a drilling carry in the amount of $10.7 million to support development of this acreage through July 2017. If we have not incurred the full balance of the drilling carry by certain dates in 2016 and 2017, we will be required to make a cash payment to the seller to satisfy any shortfall. We anticipate that we will incur a $1.9 million obligation pursuant to this commitment in June 2016.

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 March 31, 2016. As of March 31, 2016, we also had AROs of approximately $2.7 million attributable to the plugging of abandoned wells.