Commitments and Contingencies

9 Months Ended

Sep. 30, 2013

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Note 7. Commitments and Contingencies

We are involved in various lawsuits, claims and other regulatory proceedings incidental to our businesses.  While we currently believe that the ultimate outcome of these proceedings, individually and in the aggregate, will not have a material adverse effect on our financial position, results of operations or cash flows, litigation is subject to inherent uncertainties.  If an unfavorable ruling were to occur, there exists the possibility of a material adverse impact on our net income in the period in which the ruling occurs.  We provide accruals for litigation and claims if we determine that a loss is probable and the amount can be reasonably estimated.  We are also subject to audits for sales and use taxes and severance taxes in the various states in which we operate, and from time to time receive assessments for potential taxes that we may owe.

Delhi Field Release

In June 2013, a release of well fluids, consisting of a mixture of carbon dioxide, saltwater, natural gas and oil, was discovered and reported within an area of the Denbury-operated Delhi Field located in northern Louisiana.  Denbury immediately took remedial action to stop the release and contain and recover well fluids in the affected area. We have determined that the release originated from one or more wells in the affected area of the field that had been previously plugged and abandoned by a prior operator of the field. We currently expect that our ongoing remediation efforts will be completed during the fourth quarter of 2013; however we will continue to monitor the area for a period of time thereafter to ensure the remediation efforts were successful.

During the three and nine months ended September 30, 2013, we recorded $28.0 million and $98.0 million, respectively, of lease operating expenses related to this release in our Unaudited Condensed Consolidated Statement of Operations, and as of September 30, 2013 we had a corresponding $31.3 million liability classified as “Accounts payable and accrued liabilities” in our Unaudited Condensed Consolidated Balance Sheet. These expenses represent our current estimate of the costs to remediate this release based on actual costs incurred through October 31, 2013 of approximately $85 million, plus the Company's estimate of future costs related to the satisfaction of known claims and liabilities. Due to the possibility of new claims being asserted in the future in connection with the release, as well as variability in the costs of certain of our remediation-related activities which have been identified and/or begun but which have not been completed, we cannot reliably estimate at this time the full extent of the costs that may ultimately be incurred by the Company related to this release. Although the Company maintains insurance policies which we believe cover certain of the costs and damages related to the release, and we currently estimate that one-third to two-thirds of our current cost estimate may be recoverable under such insurance policies, we have not reached any agreement with our insurance carriers as to recoverable amounts, and accordingly have not recognized any such recoveries in our financial statements as of September 30, 2013. Insurance recoveries will be recognized in our financial statements during the period received or at the time receipt is determined to be virtually certain.