Commitments and Contingencies

9 Months Ended

Sep. 30, 2020

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Drilling and Completion Commitments

In the first half of 2020, we released our contracted drilling rigs in connection with the suspension of our drilling program. Costs of $2.0 million associated with temporary stand-by status and the demobilization of the rigs in connection with their release were capitalized to our full cost pool. Beginning in September 2020, we entered into drilling contracts on pad-to-pad bases pursuant to which we intend to drill at least two pads in the fourth quarter 2020. We prepaid $1.0 million in costs in connection with such agreements.

In August 2020, we terminated an agreement for certain frac services and related materials that was in effect for calendar year 2020. In September 2020, we prepaid $2.0 million to an alternative frac service provider in connection with the restart of our limited drilling and completion program beginning in October 2020.

Crude Oil Storage

In the first half of 2020, we secured crude oil storage capacity with Nuevo Dos Gathering and Transportation, LLC (“Nuevo G&T”) for up to 70,000 barrels through October 2020 as a supplement (“Nuevo supplemental capacity”) to our current dedicated capacity of approximately 180,000 barrels of tank shell capacity at Nuevo G&T’s central delivery point facility in Lavaca County, Texas. The total remaining obligation under the Nuevo supplemental capacity was less than $0.1 million as of September 30, 2020. In April 2020, we secured additional crude oil storage capacity for up to approximately 90,000 barrels with a downstream interstate pipeline at their facility in DeWitt County, Texas, for an initial term of up to six months beginning in May 2020. The total remaining obligation under this agreement is less than $0.1 million as of September 30, 2020. As amended or otherwise extended prior to September 2020, this agreement and the Nuevo supplemental capacity agreement will continue on a month-to-month basis thereafter, for less than $0.1 million per month, and can be terminated by either party with 45 days’ notice. Costs associated with these agreements are in the form of monthly fixed rate short-term leases and are charged as incurred on a monthly basis to GPT.

Gathering and Intermediate Transportation Commitments

We have long-term agreements with Nuevo G&T and Nuevo Dos Marketing, LLC (“Nuevo Marketing” and together with Nuevo G&T, collectively “Nuevo”) to provide gathering and intermediate pipeline transportation services for a substantial portion of our crude oil and condensate production in as well as volume capacity support for certain downstream interstate pipeline transportation.

Nuevo is obligated to gather and transport our crude oil and condensate from within a dedicated area in the Eagle Ford via a gathering system and intermediate takeaway pipeline connecting to a downstream interstate pipeline operated by a third party through 2041. We have a minimum volume commitment (“MVC”) of 8,000 gross barrels of oil per day to Nuevo through 2031 under the gathering agreement. We are obligated to deliver the first 20,000 gross barrels of oil per day produced from Gonzales, Lavaca, Fayette and DeWitt Counties, Texas.

Under a marketing agreement, we have a commitment to sell 8,000 barrels per day of crude oil (gross) to Nuevo, or to any third party, utilizing Nuevo Marketing’s capacity on a downstream interstate pipeline through 2026.

Under each of the agreements with Nuevo, credits for deliveries of volumes in excess of the volume commitment may be applied to any deficiency arising in the succeeding 12-month period.

Excluding the application of existing credits that we have earned during the preceding 12-month period ended September 30, 2020 for deliveries of volumes in excess of the volume commitment, and the potential impact of the effects of price escalation from commodity price changes, if any, the minimum fee requirements attributable to the MVC under the gathering and transportation agreement are as follows: $3.2 million for the remainder of 2020, $13.0 million per year for 2021 through 2025, $7.4 million for 2026, $3.8 million per year for 2027 through 2030 and $2.2 million for 2031.

Legal, Environmental Compliance and Other Claims

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. As of September 30, 2020, we had AROs of approximately $5.3 million attributable to the plugging of abandoned wells. As of September 30, 2020, we had an estimated reserve of approximately $0.1 million for certain claims made against us regarding previously divested operations included in “Accounts payable and accrued liabilities.”