Annual report pursuant to Section 13 and 15(d)


12 Months Ended
Dec. 31, 2016
Leases [Abstract]  

15. Commitments

We have operating lease agreements for office space and office equipment.  The lease for the majority of our office space terminates in December 2022.  Minimum future lease payments due under noncancelable operating leases with terms in excess of one year as of December 31, 2016 are as follows: 2017–$1.6 million; 2018–$1.7 million; 2019–$1.8 million; 2020–$1.8 million thereafter–$3.7 million.  Total rent expense was approximately $3.2 million, $3.3 million and $3.2 million during 2016, 2015 and 2014, respectively.

Pursuant to the Purchase and Sale Agreement with Total E&P, we may fulfill security requirements related to ARO for certain properties through securing bonds, or through making payments to an escrow account under a formula pursuant to the agreement, or a combination thereof, until certain prescribed thresholds are met.  Once the threshold is met for that year, excess funds in the escrow account are returned to us.  As of December 31, 2016, we had bonds totaling $75.0 million and had $1.9 million in an escrow account.  The threshold is $83.0 million for 2017, $88.0 million for 2018 and escalates to $103.0 million for 2023 in $3.0 million per year increments.

Pursuant to the Purchase and Sale Agreement with Shell Offshore Inc. (“Shell”) related to ARO for certain properties, we have bonds that are subject to re-appraisal by either party after November 2015.  As of December 31, 2016, neither party had requested a re-appraisal to be made.  The current security requirement of $64.0 million could be increased up to $94.0 million depending on certain conditions and circumstances.

During 2016, 2015 and 2014, we had surety bonds related to our decommissioning obligations or ARO.  Total expenses related to surety bonds, inclusive of the surety bonds in connection with the Total E&P and Shell agreements described above, were $4.3 million, $5.5 million and $4.1 million during 2016, 2015 and 2014, respectively.  The amount of future commitments is dependent on rates charged in the market place and when asset retirements are completed.  Estimated future expenses related to surety bonds were based on current market prices and estimates of the timing of asset retirements, of which some wells and structures are estimated to extend to 2030.  Future costs are estimated as follows: 2017–$6.1 million; 2018–$5.9 million; 2019–$5.2 million; 2020–$5.0 million; thereafter–$38.6 million.  See Notes 17 and 19 for information concerning financial assurances per the BOEM regulations, which could impact future cost estimates related to surety bonds.    

As of December 31, 2016, we had $16.9 million of collateral deposits for certain sureties related to certain surety bonds for decommissioning obligations and appeals submitted to the Interior Board of Land Appeals (the “IBLA”).

Pursuant to an agreement with the Helix Well Containment Group, we are required to make payments quarterly in advance to have access to certain equipment to respond to a subsea spill should a spill occur at a property we operate.  As of December 31, 2016, future payments due are $1.7 million in 2017 and $1.7 million in 2018.  These payments may increase or decrease depending on whether the number of companies participating in the consortium changes.

We have no drilling rig commitments with a term that exceeded one year as of December 31, 2016 and our drilling rig commitments meet the criteria of an operating lease.  Future payments of all drilling rig commitments as of December 31, 2016 were $7.4 million, of which $2.9 million relates to ARO projects.