VQ » Topics » Note 8-Commitments and Contingencies

These excerpts taken from the VQ 10-K filed Mar 5, 2009.

Commitments and Contingencies

        As of December 31, 2008, the aggregate amounts of contractually obligated payment commitments for the next five years were as follows (in thousands):

 
  Less than
One Year
  1 to 3
Years
  3 to 5
Years
  After
5 years
  Total(1)  

Long-term debt

  $ 2,598   $ 797,670           $ 800,268  

Interest on senior notes

    13,125     25,639             38,764  

Rental of office space

    2,455     4,741   $ 4,660   $ 7,957     19,813  
                       
 

Total

  $ 18,178   $ 828,050   $ 4,660   $ 7,957   $ 858,845  
                       

(1)
Total contractually obligated payment commitments do not include the anticipated settlement of derivative contracts, obligations to taxing authorities or amounts relating to our asset retirement obligations, which include plugging and abandonment obligations, due to the uncertainty surrounding the ultimate settlement amounts and timing of these obligations. Our total asset retirement obligations were $80.6 million at December 31, 2008.

(2)
Amounts related to interest expense on our revolving credit facility and second lien term loan facility are not included in the table above because the interest rates on those debt instruments are variable. During the years ended December 31, 2006, 2007 and 2008, we incurred interest expense on those debt instruments of $35.4 million, $50.0 million and $40.3 million, respectively.

Commitments and Contingencies



        As of December 31, 2008, the aggregate amounts of contractually obligated payment commitments for the next five years were as
follows (in thousands):

















































































































































 
 Less than

One Year
 1 to 3

Years
 3 to 5

Years
 After

5 years
 Total(1)  

Long-term debt

 $2,598 $797,670     $800,268 

Interest on senior notes

  13,125  25,639      38,764 

Rental of office space

  2,455  4,741 $4,660 $7,957  19,813 
            
 

Total

 $18,178 $828,050 $4,660 $7,957 $858,845 
            










(1)
Total
contractually obligated payment commitments do not include the anticipated settlement of derivative contracts, obligations to taxing authorities or
amounts relating to our asset retirement obligations, which include plugging and abandonment obligations, due to the uncertainty surrounding the ultimate settlement amounts and timing of these
obligations. Our total asset retirement obligations were $80.6 million at December 31, 2008.


(2)
Amounts
related to interest expense on our revolving credit facility and second lien term loan facility are not included in the table above because the
interest rates on those debt instruments are variable. During the years ended December 31, 2006, 2007 and 2008, we incurred interest expense on those debt instruments of $35.4 million,
$50.0 million and $40.3 million, respectively.


These excerpts taken from the VQ 10-K filed Mar 17, 2008.

Commitments and Contingencies

        As of December 31, 2007, the aggregate amounts of contractually obligated payment commitments for the next five years were as follows (in thousands):

 
  Less than One
Year

  1 to 3
Years

  3 to 5
Years

  After 5
years

  Total(1)
Long-term debt   $ 3,449   $ 42,443   $ 649,453   $   $ 695,345
Interest on senior notes     13,125     26,250     12,514         51,889
Rental of office space     2,235     4,899     4,607     10,307     22,048
   
 
 
 
 
Total   $ 18,809   $ 73,592   $ 666,574   $ 10,307   $ 769,282
   
 
 
 
 

(1)
Total contractually obligated payment commitments do not include the anticipated settlement of derivative contracts, obligations to taxing authorities or amounts relating to our asset retirement obligations, which include plugging and abandonment obligations, due to the uncertainty surrounding the ultimate settlement amounts and timing of these obligations. Our total asset retirement obligations were $52.2 million at December 31, 2007.

(2)
Amounts related to interest expense on our revolving credit facility and second lien term loan facility are not included in the table above because the interest rates on those debt instruments are variable. During the years ended December 31, 2005, 2006 and 2007, we incurred interest expense on those debt instruments of $0.6 million, $35.4 million and $50.0 million, respectively.

Commitments and Contingencies



        As of December 31, 2007, the aggregate amounts of contractually obligated payment commitments for the next five years were as follows (in thousands):




















































































































 
 Less than One

Year

 1 to 3

Years

 3 to 5

Years

 After 5

years

 Total(1)
Long-term debt $3,449 $42,443 $649,453 $ $695,345
Interest on senior notes  13,125  26,250  12,514    51,889
Rental of office space  2,235  4,899  4,607  10,307  22,048
  
 
 
 
 
Total $18,809 $73,592 $666,574 $10,307 $769,282
  
 
 
 
 






(1)
Total
contractually obligated payment commitments do not include the anticipated settlement of derivative contracts, obligations to taxing authorities or amounts relating to our asset
retirement obligations, which include plugging and abandonment obligations, due to the uncertainty surrounding the ultimate settlement amounts and timing of these obligations. Our total asset
retirement obligations were $52.2 million at December 31, 2007.


(2)
Amounts
related to interest expense on our revolving credit facility and second lien term loan facility are not included in the table above because the interest rates on those debt
instruments are variable. During the years ended December 31, 2005, 2006 and 2007, we incurred interest expense on those debt instruments of $0.6 million, $35.4 million and
$50.0 million, respectively.


This excerpt taken from the VQ 10-K filed Apr 2, 2007.

Commitments and Contingencies

        As of December 31, 2006, the aggregate amounts of contractually obligated payment commitments for the next five years were as follows (in thousands):

 
  Less than One
Year

  1 to 3
Years

  3 to 5
Years

  After 5
years

  Total(1)
Long-term debt   $ 3,557   $ 31,417   $ 498,199   $   $ 533,173
Interest on senior notes     13,125     26,250     25,156         64,531
Rental of office space     1,837     3,849     3,741     11,419     20,846
   
 
 
 
 
Total   $ 18,519   $ 61,516   $ 527,096   $ 11,419   $ 618,550
   
 
 
 
 

(1)
Total contractually obligated payment commitments do not include the anticipated settlement of derivative contracts or amounts relating to our asset retirement obligations, which include plugging and abandonment obligations. Our total asset retirement obligations were $42.0 million at December 31, 2006.

59


Critical Accounting Policies and Estimates

        Our discussion and analysis of our financial condition and results of operations are based upon financial statements that have been prepared in accordance with accounting principles generally accepted in the United States, or GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. We have identified certain accounting policies as being of particular importance to the presentation of our financial position and results of operations and which require the application of significant judgment by our management. We analyze our estimates, including those related to oil and natural gas revenues, oil and natural gas properties, fair value of derivative instruments, income taxes and contingencies and litigation, and base our estimates on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. We believe the following critical accounting policies and estimates affect our more significant judgments and estimates used in the preparation of our financial statements.

This excerpt taken from the VQ 8-K filed Jun 14, 2006.

Note 8—Commitments and Contingencies

Lease commitments

        The Successor has assumed certain of TDC's non-cancelable operating leases covering certain compression equipment and facilities and office space. Additionally, during 2005, the Company entered into a lease agreement for its current corporate office space. The following is a schedule of future minimum lease payments as of December 31, 2005 (in thousands):

Years Ending December 31,

   
2006   $ 920
2007     253
2008     274
2009     332
2010     186
   
    $ 1,965
   

        Rent expense incurred by the Successor under operating leases amounted to $657,000 from Inception (October 31, 2004) to December 31, 2004 and $2,196,000 during the year ended December 31, 2005. Rent expense incurred by the Predecessor under operating leases amounted to $2,684,000 for the year ended December 31, 2003 and $1,697,000 for the nine months ended September 30, 2004.

    Litigation

        At December 31, 2005, the Company is a defendant in a lawsuit, assumed from TDC, for breach of contract. Another lawsuit, assumed from TDC, relating to joint interest disputes was settled during 2005.

        Arch W. Helton et al. v. Tri-Union Development Corporation, in the United States Bankruptcy Court for the Southern District of Texas, Houston Division; related to Helton v. Tri-Union, in the 80th Judicial District Court of Harris County, Texas. On May 28, 1997, Arch W. Helton and Helton Properties, Inc. and later joined by Linda Barnhill (collectively "Helton parties") filed a lawsuit against TDC alleging that TDC owed additional royalties on oil and natural gas produced beginning in February 1987 through the initiation of the lawsuit with respect to 18 acres of property in Alvin, Texas. As to the Helton parties' largest claim, TDC received a favorable decision from the Texas Railroad Commission, which has been upheld on appeal. After a trial conducted in August and September 2003, the bankruptcy court issued a ruling that resulted in the full avoidance of all of the plaintiffs' claims. The Helton parties have appealed this decision with the Fifth Circuit Court of Appeals ("Fifth Circuit"). A briefing schedule has not been set by the Fifth Circuit. Approximately $1.1 million has been segregated pursuant to bankruptcy court order in accordance with the initial plan of reorganization pending resolution of this claim. The Company acquired TDC's interest in and claim to the $1.1 million of escrowed funds and the right to defend against any further claims brought by the Helton parties. The Company intends to vigorously defend against the appeal by the Helton parties.

        Samson Lone Star Limited Partnership ("Samson"), et al v. Tri-Union Development Corporation, in the United States Bankruptcy Court for the Southern District of Texas, Houston Division. On August 31, 2004, Samson Lone Star Limited Partnership filed a lawsuit and a subsequent motion for a lifting and relief of the automatic stay, alleging that TDC's working interest in the Westbury Farms Gas Unit leases terminated because of TDC's alleged failure to consent to "save the lease" workover operations performed by Samson. TDC filed a response in opposition to the motion and engaged in

16



discovery. The Company acquired TDC's interest in the leases and the right to defend against this matter. During August, 2005 the Company and Samson settled the lawsuit. Under the terms of the settlement agreement, all rights and interests of Tri-Union in the well, farmout leases, farmout agreement and assignments are assumed, assigned and transferred to the Company. Samson agreed to pay the Company $575,000, representing a portion of the net proceeds of production owed prior to July 1, 2005 based upon the Company's 25% working interest in the well. The Company's interest shall be a fully participating interest in the well and farmout leases. The Company shall be entitled to all net proceeds of or other funds from or attributable to its working interest in the well and farmout leases on and after July 1, 2005. Samson agreed to withdraw all claims in the bankruptcy cases and to consider all such claims resolved.

Potential litigation

        On February 24, 2006, James Cowan, a 38 year old man, was fatally injured while working as a gauger/pumper at a Company-operated well, the R. Casey No. 1 well in Madison County, Texas. Cowan was not hired or employed by the Company, but appears to have been working as a subcontractor for the Company's contract gauger/pumper. The Company entered into an agreement with the widow of James Cowan not to remove or alter the existing condition of certain equipment that may have been involved in the incident.

Regulatory and environmental contingencies

        The Company, as an owner and operator of oil and natural gas properties, is subject to various federal, state and local laws and regulations relating to discharge of materials into, and protection of, the environment. These laws and regulations may, among other things, impose liability on the lessee under an oil and natural gas lease for the cost of pollution clean-up resulting from operations and subject the lessee to liability for pollution damages. The Company maintains insurance coverage that it believes is customary in the industry, although it is not fully insured against all environmental risks.

        The Company is not aware of any environmental claims existing as of December 31, 2005, which would have a material impact on its financial position or results of operations. There can be no assurance, however, that current regulatory requirements will not change, or that past non-compliance with environmental laws will not be discovered on the Company's properties.

This excerpt taken from the VQ 10-K filed Apr 5, 2006.

9.     COMMITMENTS AND CONTINGENCIES

        Leases—The Company has entered into agreements to lease office space from third parties. As of December 31, 2005, future minimum lease payments under operating leases that have initial or remaining non-cancelable terms in excess of one year are $191,000, $190,000 and $65,000 in 2006, 2007 and 2008, respectively. Net rent expense incurred on office space leased from third parties was $0.9 million, $1.2 million and $1.0 million in 2005, 2004 and 2003, respectively.

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