COMMITMENTS AND CONTINGENCIES

12 Months Ended

Dec. 31, 2021

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies Disclosure

NOTE 13 - COMMITMENTS AND CONTINGENCIES

The following table presents our firm transportation, sales and processing, water delivery and disposal and purchase commitments:

	Year Ending December 31,
	2022		2023		2024		2025		2026		Thereafter		Total		Expiration Date for Thereafter
Natural gas (MMcf)	82,264		82,264		82,489		70,296		37,029		73,050		427,392		December 31, 2030
Crude oil (MBbls)	23,360		19,685		9,882		9,855		6,561		—		69,343
Water (MBbls)	6,207		6,207		6,224		—		—		—		18,638
Purchase obligation (Tons)	110,000		300,000		—								410,000
Dollar commitment (in thousands)	$	153,857	$	157,370	$	92,247	$	77,491	$	39,631	$	37,811	$	558,407

Firm Transportation and Processing Agreements. We enter into contracts that provide firm transportation and processing on pipeline systems through which we transport or sell crude oil and natural gas. Satisfaction of the volume requirements includes volumes produced by us and purchased from third parties and produced by other third-party working, royalty and overriding royalty interest owners, whose volumes we market on their behalf. Our consolidated statements of operations reflect our share of these firm transportation and processing costs. These contracts require us to pay these transportation and processing charges whether or not the required volumes are delivered. We may from time to time find ourselves unable to market our commodities at prices acceptable to us, or at all, which could cause us to be unable to meet these obligations. In such cases, we may be subject to fees, minimum margins or other payments. Payments related to our long-term transportation and processing agreements, net of interests, were $31.3 million, $21.4 million, and $27.3 million for the years ended December 31, 2021, 2020, and 2019, respectively.

Facilities Expansion Agreements. We entered into two facilities expansion agreements with our primary midstream provider to expand and improve its natural gas gathering pipelines and processing facilities in the Wattenberg Field. The midstream provider completed and turned on line two 200 MMcfd cryogenic plants in 2018 and 2019. Both agreements require baseline volume commitments and aggregate incremental wellhead volume commitments of 98.1 MMcfd and 77.3 MMcfd for the first and second agreements, respectively. We may be required to pay shortfall fees for any volumes under aggregate incremental commitments. Any shortfall in these volume commitments may be offset by other producers’ volumes sold to the midstream provider that are greater than a certain total baseline volume. We are also required for the first three years of the contracts to guarantee a certain target profit margin to the midstream provider on these incremental volumes. The actual net shortfall in target profit margin incurred, which we guaranteed to our midstream provider, was included as part of contract assets as part of other assets on the consolidated balance sheets.

Firm sales agreement. As of December 31, 2021 we had a firm sales agreement with an integrated marketing company for our crude oil production in the Delaware Basin through 2023. This agreement is expected to provide price diversification through realization of export market pricing via a Corpus Christi terminal and exposure to Brent-weighted prices. This agreement does not require physical delivery of the minimum volumes of crude oil over the contractual term. However, if we do not sell and deliver at least the minimum contract volume pursuant to the agreement, we are required to pay transportation reservation charges related to the undelivered volume. For the years ended December 31, 2021 and 2020, we did not incur material transportation reservation charges under this agreement.

Purchase Obligation. As of December 31, 2021 we had a purchase agreement to buy a minimum volume of frac sand at a fixed sales price effective June 2022 through December 2023. The obligation included in the table above represents the minimum financial commitments pursuant to the terms of the agreement as of December 31, 2021.

Litigation and Legal Items. We are involved in various legal proceedings. We review the status of these proceedings on an ongoing basis and, from time to time, may settle or otherwise resolve these matters on terms and conditions that management believes are in our best interests. We have provided the necessary estimated accruals in the accompanying consolidated balance sheets where deemed appropriate for litigation and legal related items that are ongoing and not yet concluded. Although the results cannot be known with certainty, we currently believe that the ultimate results of such proceedings will not have a material adverse effect on our financial position, results of operations or liquidity.