Commitments and Contingencies

3 Months Ended

Mar. 31, 2016

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Note 7. Commitments and Contingencies

We are involved in various lawsuits, claims and regulatory proceedings incidental to our businesses.  We are also subject to audits for various taxes (income, sales and use, and severance) in the various states in which we operate, and from time to time receive assessments for potential taxes that we may owe. 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.  Although a single or multiple adverse rulings or settlements could possibly have a material adverse effect on our finances, we only accrue for losses from litigation and claims if we determine that a loss is probable and the amount can be reasonably estimated.

NGS Sub Corp., Evolution, et al v. Denbury Onshore, LLC

In March 2015, Evolution Petroleum Corporation (together with its subsidiaries, “Evolution”), the parent of the entity which sold Denbury Onshore, LLC (“Denbury Onshore”), a subsidiary of Denbury Resources Inc. (“DRI” and together with Denbury Onshore, “Denbury”), its original interest in Delhi Field, filed an amended petition in a lawsuit which has been pending in the 133^rd Judicial District Court in Houston, Harris County, Texas since December 2013. Originally, that lawsuit involved ongoing disputes between Denbury and Evolution regarding the terms of the purchase documents under which Denbury Onshore bought its original Delhi Field interest, including disputes regarding allocation of costs in determining “payout” as defined in the agreements, and the extent and terms of assignment of reversionary interests in the unit back to Evolution following payout, along with related contractual terms. The amended petition added allegations of negligence and gross negligence against Denbury in connection with the June 2013 Delhi Field release of well fluids, and for the first time Evolution estimated its damages attributable to its allegations in the case as exceeding $200 million. The amended petition also added a claim for unspecified punitive damages. In Denbury’s answer and counterclaim, we have denied Evolution’s claims, alleged breach of contract by Evolution for failing to convey the full interest for which we paid and for violating our preferential purchase rights, and asked for a declaratory judgment as to various purchase document terms, including those pertaining to the determination of payout, the assignment of provisions of the documents, and cost sharing. Denbury has also filed a Motion for Summary Judgment seeking dismissal of Evolution’s tort claims for negligence and gross negligence.

Discovery is ongoing in the case, and the case is currently set for trial in July 2016. We believe that Evolution’s claims and requests for damages in this matter are without merit and we intend to vigorously pursue our requested relief under the purchase documents.