Quarterly report pursuant to Section 13 or 15(d)


6 Months Ended
Jun. 30, 2014
Other [Abstract]  

Note 10 – Other


Operating leases


In April 2012, the Company contracted a drilling rig (the “Cactus 1 Rig”) for a term of two years, which it subsequently renewed in March 2014 for an additional two-year term ending in April 2016. In April 2014, the Company contracted an additional horizontal drilling rig (the “Cactus 2 Rig”) for a term of two years ending in April 2016. The Cactus 2 Rig replaced a previously contracted horizontal drilling rig, which was cancelled in March 2014. The Cactus 1 and Cactus 2 Rig lease agreements include early termination provisions that would reduce the minimum rentals under the agreement, and also include early termination payments that would be reduced assuming the lessor is able to re-charter the rig and staffing personnel to another lessee. Lease payments in 2014,  2015 and 2016 are expected to approximate $18,111 (with $9,200 remaining at June 30, 2014), $18,250 and $4,795, respectively.



Other property and equipment


As disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013, the Company made a decision to abandon certain specialized deep water property and equipment received as part of a prior settlement agreement related to various disputes with a previous joint interest partner as a result of the unsuccessful marketing of such assets. Accordingly, the Company recognized an impairment charge of $1,707 related to such property and equipment in the year ended December 31, 2013. Subsequent to the filing of the Annual Report on Form 10-K, the Company entered into an agreement to sell the property and equipment to a third party. While the third party had previously performed some initial inspection and evaluation of the equipment, based on the amount of time the equipment had been unsuccessfully marketed and the feedback from potential buyers, management concluded the likelihood of completing a sale of the equipment was low, resulting in the decision to abandon the equipment and recognize an impairment charge in 2013. As a result of the subsequent sale of the property and equipment, the Company recognized a gain of $1,080 in the first quarter 2014.


Subsequent Events


In August 2014, the Company signed a one-year contract for a vertical drilling rig to be used as part of our horizontal drilling program, drilling the vertical component of horizontal wells. Lease payments in 2014 and 2015 are expected to approximate $1,656 and $4,914, respectively, subject to customary termination provisions.