Annual report pursuant to Section 13 and 15(d)

Commitments and Contingencies

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Commitments and Contingencies
12 Months Ended
Dec. 31, 2019
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies
Commitments and Contingencies
The following table sets forth our significant commitments as of December 31, 2019, by category, for the next 5 years and thereafter: 
Year
 
Gathering and Intermediate Transportation
 
Other Commitments
2020
 
$
12,962

 
$
289

2021
 
12,962

 
140

2022
 
12,962

 
70

2023
 
12,962

 

2024
 
12,962

 

Thereafter
 
37,789

 

Total
 
$
102,599

 
$
499


Drilling and Completion Commitments
As of December 31, 2019, we had contractual commitments on a pad-to-pad basis for two drilling rigs. Additionally, we have a one-year agreement, effective January 1, 2020, which can be terminated with 30 days' notice by either party, to utilize certain frac services and related materials, with no minimum commitment.
Gathering and Intermediate Transportation Commitments
We have long-term agreements with Nuevo Dos Gathering and Transportation, LLC (“Nuevo G&T”) and Nuevo Dos Marketing, LLC (“Nuevo Marketing” and together with Nuevo G&T, collectively “Nuevo”), successor to Republic Midstream, LLC and affiliates, to provide gathering and intermediate pipeline transportation services for a substantial portion of our crude oil and condensate production in South Texas as well as volume capacity support for certain downstream interstate pipeline transportation.
Nuevo is obligated to gather and transport our crude oil and condensate from within a dedicated area in the Eagle Ford via a gathering system and intermediate takeaway pipeline connecting to a downstream interstate pipeline operated by a third party through 2041. We have a minimum volume commitment of 8,000 gross barrels of oil per day to Nuevo through 2031 under the gathering agreement.
Under a marketing agreement, we have a commitment to sell 8,000 barrels per day of crude oil (gross) to Nuevo, or to any third party, utilizing Nuevo Marketing's capacity in a downstream interstate pipeline through 2026.
Other Commitments
We have entered into certain contractual arrangements for other products and services. We have purchase commitments for certain materials as well as minimum commitments under information technology licensing and service agreements, among others.
Legal
We are involved, from time to time, in various legal proceedings arising in the ordinary course of business. While the ultimate results of these proceedings cannot be predicted with certainty, our management believes that these claims will not have a material effect on our financial position, results of operations or cash flows. As of December 31, 2019, we had a reserve in the amount of $0.3 million included in Accounts payable and accrued liabilities for the estimated settlement of disputes with a joint venture partner regarding certain transactions that occurred in prior years.
Environmental Compliance
Extensive federal, state and local laws govern oil and gas operations, regulate the discharge of materials into the environment or otherwise relate to the protection of the environment. Numerous governmental departments issue rules and regulations to implement and enforce such laws that are often difficult and costly to comply with and which carry substantial administrative, civil and even criminal penalties for failure to comply. Some laws, rules and regulations relating to protection of the environment may, in certain circumstances, impose “strict liability” for environmental contamination, rendering a person liable for environmental and natural resource damages and cleanup costs without regard to negligence or fault on the part of such person. Other laws, rules and regulations may restrict the rate of oil and gas production below the rate that would otherwise exist or even prohibit exploration or production activities in sensitive areas. In addition, state laws often require some form of remedial action to prevent pollution from former operations, such as plugging of abandoned wells. As of December 31, 2019, we have recorded AROs of $4.9 million attributable to these activities. The regulatory burden on the oil and gas industry increases its cost of doing business and consequently affects its profitability. These laws, rules and regulations affect our operations, as well as the oil and gas exploration and production industry in general. We believe that we are in substantial compliance with current applicable environmental laws, rules and regulations and that continued compliance with existing requirements will not have a material impact on our financial condition or results of operations. Nevertheless, changes in existing environmental laws or the adoption of new environmental laws, including any significant limitation on the use of hydraulic fracturing, have the potential to adversely affect our operations.