Acquisition and Development Agreement and Carry and Earning Agreement

12 Months Ended

Dec. 31, 2015

Acquisition and Development Agreement and Carry and Earning Agreement [Abstract]

Acquisition and Development Agreement and Carry and Earning Agreement

Note 12 - Acquisition and Development Agreement

In June 2011, the Company entered into an Acquisition and Development Agreement with Mitsui (the “Acquisition and Development Agreement”). Pursuant to the Acquisition and Development Agreement, the Company agreed to transfer to Mitsui a 12.5 percent working interest in certain non-operated oil and gas assets representing approximately 39,000 net acres in Dimmit, LaSalle, Maverick, and Webb Counties, Texas. As consideration for the oil and gas interests transferred, Mitsui agreed to pay, or carry, 90 percent of certain drilling and completion costs attributable to the Company’s remaining interest in these assets until Mitsui expended an aggregate $680.0 million on behalf of the Company. The Acquisition and Development Agreement also provided for reimbursement of capital expenditures and other costs, net of revenues, paid by the Company that were attributable to the transferred interest during the period between the effective date and the closing date, which the parties agreed would be applied over the carry period to cover the Company’s remaining 10 percent of drilling and completion costs for the affected acreage.

During the second quarter of 2014, the remainder of the carry under the Acquisition and Development Agreement was expended. Accordingly, the Company accrued and funded its full share of drilling and completion costs in its non-operated Eagle Ford shale program for the remainder of 2014 and all of 2015.