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

 

As of December 31, 2015, the Company had contracts for two horizontal drilling rigs (the “Cactus 1 Rig” and “Cactus 2 Rig”). The Cactus 1 Rig was initially contracted for a term of two years in April 2012. The Cactus 2 Rig was initially contracted for a term of two years in April 2014. The Cactus 2 Rig replaced a previously contracted horizontal drilling rig, which was cancelled in March 2014. In March 2015, the Company extended the terms of its Cactus 1 Rig and Cactus 2 Rig to end in July 2018 and August 2018, respectively. The rig lease agreements include early termination provisions that obligate the Company to reduced minimum rentals pursuant to a “standby” dayrate for the term of the agreement. These payments would be reduced assuming the lessor is able to re-charter the rig and staffing personnel to another lessee.

 

In January 2016, the Company decided to place the Cactus 1 Rig on standby and will be required to pay a “standby” day rate of $15,000 per day, pursuant to the terms of the agreement, and the Company retains the option to return the rig to service.

 

In March 2015, the Company decided to terminate its one-year contract for a vertical rig (effective April 2015). The Company paid approximately $3,075 in reduced rental payments over the remainder of the lease term, which ended November 2015. The amount was recognized as rig termination fee on the consolidated statements of operations for the year ended December 31, 2015.  

 

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.