Annual report pursuant to Section 13 and 15(d)


12 Months Ended
Dec. 31, 2018
Leases [Abstract]  

16. Commitments

We have operating lease agreements for office space.  The lease for 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, 2018 are as follows: 2019–$1.5 million; 2020–$1.6 million; 2021–$1.6 million; 2022–$1.6 million and thereafter–$0.0 million.  Total rent expense was approximately $3.4 million, $3.0 million and $3.2 million during 2018, 2017 and 2016, 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 surety 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, 2018, we had surety bonds related to the agreement with Total E&P totaling $88.5 million and had no amounts in escrow.  The threshold is $91.0 million for 2019 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 surety bonds that are subject to re-appraisal by either party.  As of December 31, 2018, neither party had requested a re-appraisal to be made.  The current security requirement of $64.0 million, which we have met and could be increased up to $94.0 million depending on certain conditions and circumstances.

During 2018, 2017 and 2016, we had surety bonds primarily 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 $5.9 million, $5.7 million and $4.3 million during 2018, 2017 and 2016, 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 2065.  Future payment estimates are: 2019–$4.5 million; 2020–$4.2  million; 2021–$3.9 million; 2022–$3.9 million; 2023 - $3.8 million and thereafter–$33.6 million.  Future surety bond costs may change due to a number of factors, including changes and interpretations of regulations by the BOEM regulations.    

As of December 31, 2018, we had $6.9 million of collateral deposits for certain sureties related to certain surety bonds for appeals submitted to the Interior Board of Land Appeals (the “IBLA”).

In conjunction with the purchase of an interest in the Heidelberg field, we assumed contracts with certain pipeline companies that contain minimum quantities obligations that extend to 2028.  As of December 31, 2018, the estimated future costs are: 2019–$4.9 million; 2020–$4.0 million; 2021–$2.3 million; 2022–$1.7 million; 2023–$1.2 million; and thereafter–$2.0 million.

We have no drilling rig commitments with a term that exceeded one year as of December 31, 2018 and our drilling rig commitments meet the criteria of an operating lease.  Future payments of all drilling rig commitments as of December 31, 2018 were $9.7 million.