Note 14 – Other

Commitments and contingencies

The Company is involved in various claims and lawsuits incidental to its business. In the opinion of management, the ultimate liability hereunder, if any, will not have a material adverse effect on the financial position or results of operations of the Company.

The Company’s activities are subject to federal, state and local laws and regulations governing environmental quality and pollution control. Although no assurances can be made, the Company believes that, absent the occurrence of an extraordinary event, compliance with existing federal, state and local laws, rules and regulations governing the release of materials into the environment or otherwise relating to the protection of the environment are not expected to have a material effect upon the capital expenditures, earnings or the competitive position of the Company with respect to its existing assets and operations. The Company cannot predict what effect additional regulation or legislation, enforcement policies hereunder, and claims for damages to property, employees, other persons and the environment resulting from the Company’s operations could have on its activities.

Operating leases

In April 2012, the Company contracted a drilling rig (the “Cactus 1 Rig”), which it subsequently renewed in December 2014 for a term of two years ending November 2016. In April 2014, the Company contracted an additional horizontal drilling rig (the “Cactus 2 Rig”), which it subsequently renewed in December 2014 for a term of two years ending in November 2016. The Cactus 2 Rig replaced a previously contracted horizontal drilling rig, which was cancelled in March 2014. In August 2014, the Company signed a one-year contract for a vertical drilling rig to be used as part of its horizontal drilling program, drilling the vertical section of horizontal wells. The rig lease agreements include early termination provisions that would reduce the minimum rentals under the agreement, and also include provisions that would reduce the minimal rental payments assuming the lessor is able to re-charter the rig and staffing personnel to another lessee. Subsequent to December 31, 2014, the Company decided to terminate its one-year contract for the vertical rig effective April 2015 and currently may be required to pay approximately $3,733 in reduced rental payments over the remainder of the lease term. Also subsequent to December 31, 2014, the Company extended the terms of its Cactus 1 Rig and Cactus 2 Rig to end in July 2018 and August 2018, respectively. Lease payments in 2014 were $17,877 and are expected to approximate $16,893 (including early termination payments), $10,980,  $10,950 and $6,510  in  2015, 2016, 2017 and 2018, respectively. 

Other property and equipment

During 2012, the Company sold certain specialized deep water property and equipment valued at $527 and determined that certain equipment components were not usable without additional rework and thus recorded an impairment charge to with respect to such equipment of $1,177. During 2013, after selling certain specialized deep water property and equipment valued at $114, the Company made a decision to abandon the equipment. As such the Company recorded an impairment charge of $1,707 representing the remaining value of this equipment. During 2014, the Company entered into an agreement to sell the property and equipment to a third party. As a result of the subsequent sale of the property and equipment, the Company recognized a gain of $1,080.