Commitments and Contingencies

9 Months Ended

Sep. 30, 2012

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Note 6 - Commitments and Contingencies

Commitments

There have been no material changes from the commitments disclosed in the notes to the Company’s consolidated financial statements included in the 2011 Form 10-K.

Contingencies

The Company is subject to litigation and claims arising in the ordinary course of business. The Company accrues for such items when a liability is both probable and the amount can be reasonably estimated. In the opinion of management, the results of such pending litigation and claims will not have a material effect on the results of operations, the financial position, or the cash flows of the Company.

The Company was a defendant in litigation wherein the plaintiffs claimed an aggregate overriding royalty interest of 7.46875 percent in production from approximately 22,000 of the Company’s net acres in the Eagle Ford shale play in South Texas. The plaintiffs sought to quiet title to their claimed overriding royalty interest and to recover unpaid overriding royalty interest proceeds allegedly due. The Company believes that the claimed overriding royalty interest has been terminated under the governing agreements and the applicable law, and has contested the plaintiffs’ claims. Both parties filed motions for summary judgment, and on February 8, 2011, the District Court in Webb County, Texas, issued an order granting plaintiffs’ motion for summary judgment and denying the Company’s motion for summary judgment. On September 30, 2011, the District Court entered final judgment for the plaintiffs and awarded then current damages of approximately $5.1 million, which included prejudgment interest. The District Court also awarded attorneys’ fees and costs to the plaintiffs. The Company appealed the District Court’s judgment and obtained a stay pending appeal that prevented the plaintiffs from executing on the judgment.

On May 23, 2012, the Fourth Court of Appeals for the State of Texas delivered its opinion in this case, which reversed the summary judgment granted to the plaintiffs by the District Court and rendered judgment that the plaintiffs take nothing. Accordingly, based on the judgment of the Fourth Court of Appeals, the plaintiffs are not entitled to their claimed aggregate 7.46875 percent overriding royalty interest, nor are they entitled to the claimed damages related to the overriding royalty interest, attorneys fees or costs. The plaintiffs have filed a petition with the Supreme Court of Texas requesting a review of the Fourth Court of Appeals judgment. In the event review is granted by the Supreme Court of Texas, the Company will continue to contest this litigation.