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Commitments and Contingencies
9 Months Ended
Sep. 30, 2021
Commitments and Contingencies [Abstract]  
Commitments and Contingencies COMMITMENTS AND CONTINGENCIES
Commitments

We have firm transportation commitments to transport our natural gas from various systems for approximately $1.1 million over the next twelve months and $0.1 million for the six months thereafter.

During the second quarter of 2018, as part of the Superior transaction (see description in Note 16 – Variable Interest Entity Arrangements), we entered into a contractual obligation committing us to spend $150.0 million (Drilling Commitment Amount) to drill wells in the Granite Wash/Buffalo Wallow area over three years starting January 1, 2019. If we do not spend all of the Drilling Commitment Amount, SP Investor receives 100% of cash distributions until the Drilling Commitment Adjustment Amount (as defined in the Amended and Restated Limited Liability Company Agreement (Agreement)) is satisfied. The total amount spent towards the $150.0 million as of September 30, 2021 was $24.8 million. At September 30, 2021, if we elected not to drill or spend any additional money in the designated area before December 31, 2021, the maximum amount of the Drilling Commitment Adjustment Amount would be $72.6 million. We do not anticipate meeting the contractual obligation over the remaining commitment period.

Environmental

We manage our exposure to environmental liabilities on properties to be acquired by identifying existing problems and assessing the potential liability. We also conduct periodic reviews, on a company-wide basis, to identify changes in our environmental risk profile. These reviews evaluate whether there is a probable liability, its amount, and the likelihood that the liability will be incurred. Any potential liability is determined by considering, among other matters, incremental direct costs of any likely remediation and the proportionate cost of employees expected to devote significant time directly to any possible remediation effort. As it relates to evaluations of purchased properties, depending on the extent of an identified environmental problem, we may exclude a property from the acquisition, require the seller to remediate the property to our satisfaction, or agree to assume liability for the remediation of the property.

We have not historically experienced significant environmental liability while being a contract driller since the greatest portion of that risk is borne by the operator. Any liabilities we have incurred have been small and were resolved while the drilling rig was on the location. Those costs were in the direct cost of drilling the well.

Litigation

The company is subject to litigation and claims arising in the ordinary course of business which may include environmental, health and safety matters, or more routine employment related claims. The company accrues for such items when a liability is both probable and the amount can be reasonably estimated. As new information becomes available or because of legal or administrative rulings in similar matters or a change in applicable law, the company's conclusions regarding the probability of outcomes and the amount of estimated loss, if any, may change. Although we are insured against various risks, there is no assurance that the nature and amount of that insurance will be adequate, in every case, to indemnify us against liabilities arising from future legal proceedings.

On May 22, 2020, the Debtors filed petitions for relief under Chapter 11 of the Bankruptcy Code. The commencement of the Chapter 11 Cases automatically stayed all the proceedings and actions against the Debtors (other than certain regulatory enforcement matters). The Debtors emerged from the Chapter 11 Cases on the Effective Date. On the Effective Date, the automatic stay was terminated and replaced with the injunction provisions in the Confirmation Order and the Plan.
In 2013, the company’s exploration and production subsidiary, UPC, drilled a well in Beaver County, Oklahoma. Certain operational issues arose and one of the working interest owners in the well filed a lawsuit claiming that UPC’s actions violated its duties under the joint operating agreement and caused damages to the owners in the well. The case went to trial in January 2019 and the jury issued a verdict in favor of the working interest owner, awarding $2.4 million in damages, including pre- and post-judgment interest. UPC appealed the verdict, and while it was pending review in the Oklahoma Court of Civil Appeals, UPC finalized a settlement agreement with the working interest owner for $2.1 million in February 2021.

The commencement of the Chapter 11 Cases also automatically stayed all proceedings and actions against the Predecessor company (other than certain regulatory enforcement matters). Effective at emergence from the Chapter 11 Cases, the automatic stay was terminated and replaced with the injunction provisions in the Confirmation Order and the Plan.

Below is a summary of two lawsuits and the respective treatment of those cases in the Chapter 11 Cases.

Cockerell Oil Properties, Ltd., v. Unit Petroleum Company, No. 16-cv-135-JHP, United States District Court for the         
Eastern District of Oklahoma.

On March 11, 2016, a putative class action lawsuit was filed against UPC styled Cockerell Oil Properties, Ltd., v. Unit Petroleum Company in LeFlore County, Oklahoma. We removed the case to federal court in the Eastern District of Oklahoma. The plaintiff alleges that UPC wrongfully failed to pay interest with respect to late paid oil and gas proceeds under Oklahoma’s Production Revenue Standards Act. The lawsuit seeks actual and punitive damages, an accounting, disgorgement, injunctive relief, and attorney fees. Plaintiff is seeking relief on behalf of royalty and working interest owners in our Oklahoma wells.

Chieftain Royalty Company v. Unit Petroleum Company, No. CJ-16-230, District Court of LeFlore County, Oklahoma.

On November 3, 2016, a putative class action lawsuit was filed against UPC styled Chieftain Royalty Company v. Unit Petroleum Company in LeFlore County, Oklahoma. The plaintiff alleges that UPC breached its duty to pay royalties on natural gas used for fuel off the lease premises. The lawsuit seeks actual and punitive damages, an accounting, injunctive relief, and attorney’s fees. Plaintiff is seeking relief on behalf of Oklahoma citizens who are or were royalty owners in our Oklahoma wells.

Settlement

In August 2020, UPC reached an agreement to settle these class actions. Under the settlement, UPC agreed to recognize class proof of claims in the amount of $15.75 million for Cockerell Oil Properties, Ltd. vs. Unit Petroleum Company, and $29.25 million in Chieftain Royalty Company vs. Unit Petroleum Company. Under the Plan, these settlements will be treated as allowed general unsecured claims against UPC. This settlement has been approved by the United States Bankruptcy Court for the Southern District of Texas, Houston Division in Case No. 20-32740 under the caption In re Unit Corporation, et al. and, in accordance with the Plan, the settlement amounts have been satisfied by distribution of the plaintiffs’ proportionate share of New Common Stock.