Commitments and Contingencies

9 Months Ended

Sep. 30, 2019

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Note 6 - Commitments and Contingencies

Commitments

Other than those items discussed below, there have been no changes in commitments through the filing of this report that differ materially from those disclosed in the 2018 Form 10-K. Please refer to Note 6 - Commitments and Contingencies in the 2018 Form 10-K for additional discussion of the Company’s commitments.

Delivery and Purchase Commitments. During the second quarter of 2019, the Company executed an amendment to its existing sand sourcing agreement that created certain commitments and potential penalties that vary based on the amount of sand the Company uses in well completions occurring in a particular area. This amended sand sourcing agreement expires on December 31, 2023. As of September 30, 2019, potential penalties under this sand sourcing agreement range from zero to a maximum of $10.0 million. The Company does not expect to incur material penalties with regard to this agreement.

Drilling Rig and Completion Service Contracts. The Company entered into new and amended drilling rig and well completion service contracts during the nine months ended September 30, 2019. As of September 30, 2019, the Company’s drilling rig and completion service contract commitments totaled $57.1 million. If all of these contracts were terminated as of September 30, 2019, the Company would avoid a portion of the contractual service commitments; however, the Company would be required to pay $38.1 million in early termination fees. Excluded from these amounts are variable commitments and potential penalties determined by the number of completion crews the Company has in operation in a particular area under a completion service arrangement. As of September 30, 2019, potential penalties under this completion service arrangement, which expires on December 31, 2023, range from zero to a maximum of $14.3 million. The Company does not expect to incur material penalties with regard to its drilling rig and completion service contracts.

Electrical Power Purchase Contracts. During the second quarter of 2019, the Company entered into a fixed price contract for the purchase of electrical power that increased the purchase commitment under an existing agreement. As of September 30, 2019, the Company had a commitment to purchase electrical power through 2027 with a total remaining obligation of $55.1 million. As of the filing of this report, the Company expects to meet this commitment.

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 anticipated results of any pending litigation and claims are not expected to have a material effect on the results of operations, the financial position, or the cash flows of the Company.