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Commitments and Contingencies | 12 Months Ended
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Dec. 31, 2020
Commitments And Contingencies Disclosure [Abstract] |
Commitments and Contingencies |
(15) | Commitments and Contingencies
Litigation We are the subject of, or party to, a number of pending or threatened legal actions and administrative proceedings arising in the ordinary course of our business including, but not limited to, royalty claims, contract claims and environmental claims. While many of these matters involve inherent uncertainty, we believe that the amount of the liability, if any, ultimately incurred with respect to proceedings or claims will not have a material adverse effect on our consolidated financial position as a whole or on our liquidity, capital resources or future annual results of operations. When deemed necessary, we establish reserves for certain legal proceedings. The establishment of a reserve is based on an estimation process that includes the advice of legal counsel and subjective judgment of management. While management believes these reserves to be adequate, it is reasonably possible we could incur additional losses with respect to those matters in which reserves have been established. We will continue to evaluate our litigation on a quarterly basis and will establish and adjust any litigation reserves as appropriate to reflect our assessment of the then current status of litigation. We have incurred and will continue to incur capital, operating and remediation expenditures as a result of environmental laws and regulations. As of December 31, 2020 and 2019, liabilities for remediation were not material. We are not aware of any environmental claims existing as of December 31, 2020 that have not been provided for or would otherwise have a material impact on our financial position or results of operations. Environmental liabilities normally involve estimates that are subject to revision until final resolution, settlement or remediation occurs. Obligations Following Divestitures Certain contractual obligations were retained by us after our divestiture of our North Louisiana assets. These obligations are primarily related to gathering, processing and transportation agreements including certain minimum volume commitments. For additional information see Note 4, Note 11 and Note 16. Lease Commitments The components of our total lease expense for the two years ended December 31, 2020, the majority of which is included in general and administrative expense, are as follows (in thousands):
|  |  | Year Ended December 31, |  |
|  |  | 2020 |  |  |  | 2019 |  |
Operating lease cost |  | $ | 27,895 |  |  | $ | 15,536 |  |
Variable lease expense (1) |  |  | 33,849 |  |  |  | 6,916 |  |
Short-term lease expense (2) |  |  | 1,866 |  |  |  | 2,965 |  |
Sublease income |  |  | (3,199 | ) |  |  | (3,496 | ) |
Total lease expense |  | $ | 60,411 |  |  | $ | 21,921 |  |
Short-term lease costs (3) |  | $ | 15,984 |  |  | $ | 29,126 |  |
(1) Variable lease payments that are not dependent on an index or rate are not included in the lease liability or ROU assets. (2) Short-term lease expense represents expense related to leases with a contract term of one year or less. (3) These short-term lease costs are related to leases with a contract term of one year or less and the majority of which are related to drilling rigs and are capitalized as part of natural gas and oil properties on our consolidated balance sheets and may fluctuate based on the number of drilling rigs being utilized. Supplemental cash flow information related to our operating leases is included in the table below (in thousands):
|  |  | Year Ended December 31, |  |  |
|  | 2020 |  |  |  | 2019 |  |  |
Cash paid for amounts included in the measurement of lease liabilities | $ | 32,030 |  |  | $ | 18,700 |  |  |
ROU assets added in exchange for lease obligations | $ | 27,769 |  |  | $ | 24,839 |  |  |
Supplemental balance sheet information related to our operating leases is included in the table below (in thousands):
|  |  | Year Ended December 31, |  |
|  | 2020 |  |  |  | 2019 |  |
Operating lease ROU assets | $ | 63,581 |  |  | $ | 62,053 |  |
Accrued liabilities – current | $ | (24,673 | ) |  | $ | (27,856 | ) |
Operating lease liabilities – long-term | $ | (43,155 | ) |  | $ | (41,068 | ) |
As part of our ongoing effort to reduce general and administrative expenses due to both the lower commodity price environment and in conjunction with the sale of our North Louisiana assets, we vacated one floor in our Fort Worth headquarters. We recorded an impairment related to this lease of $2.0 million in the year ended December 31, 2020. In addition, in fourth quarter 2019, we announced the closing of our Houston office. We recorded an impairment related to our Houston office lease ROU asset of $2.1 million for the year ended December 31, 2019. These charges are included in impairment of proved property and other assets in our consolidated statements of operations. Our weighted average remaining lease term and weighted average discount rate for our operating leases are as follows:
|  | Year Ended December 31, |
|  | 2020 |  |  | 2019 |
Weighted average remaining lease term |  | 4.0 years |  |  | 4.6 years |
Weighted average discount rate |  | 6% |  |  | 6% |
Our lease liabilities with enforceable contract terms that are greater than one year mature as follows (in thousands):
|  | Operating Leases |
2021 | $ | 27,850 |
2022 |  | 20,868 |
2023 |  | 6,866 |
2024 |  | 6,468 |
2025 |  | 6,468 |
Thereafter |  | 8,795 |
Total lease payments |  | 77,315 |
Less effects of discounting |  | (9,487 | )
Total lease liability | $ | 67,828 |
Transportation, Gathering and Processing Contracts We have entered into firm transportation and gathering contracts with various pipeline carriers for the future transportation and gathering of natural gas, NGLs and oil production from our properties in Pennsylvania. Under these contracts, we are obligated to transport, process or gather minimum daily natural gas volumes, or pay for any deficiencies at a specified reservation fee rate. Our production committed to these pipelines is currently expected to exceed the minimum daily volumes provided in the contracts. However, if in the future we fail to deliver the committed volumes, we would recognize a deficiency payment in the period in which the under delivery takes place and the related liability has been incurred. As of December 31, 2020, future minimum transportation, processing and gathering fees under our commitments are as follows (in thousands):
| Transportation, Gathering and Processing Contracts (a) |
2021 | $ | 837,792 |
2022 |  | 818,569 |
2023 |  | 782,130 |
2024 |  | 766,474 |
2025 |  | 680,757 |
Thereafter |  | 4,138,532 |
| $ | 8,024,254 |
(a) The amounts in this table represent the gross amounts that we are committed to pay; however, we will record in our financial statements our proportionate share of costs based on our working interest which can vary based on volumes produced. In addition to the amounts included in the above table, we have entered into an additional agreement which is contingent on certain pipeline modifications and/or construction for natural gas volumes of 25,000 mcf per day and is expected to begin in 2022 with a six-year term. Not included in the table above is our estimate of accrued contractual obligations related to certain obligations retained by us after our divestiture of our North Louisiana assets. These contractual obligations are related to gathering, processing and transportation agreements including certain minimum volume commitments. There are inherent uncertainties surrounding the retained obligation and, as a result, the determination of the accrued obligation required significant judgement and estimation. The actual settlement amount and timing may differ from our estimates. See also Note 4 and Note 11. As of December 31, 2020, the carrying value of this obligation was $484.1 million (discounted) and is included in divestiture contract obligation in our consolidated balance sheet. As of December 31, 2020, our estimated settlement of this retained obligation based on a discounted value is as follows (in thousands):
| Divestiture Contract Obligation |
2021 | $ | 92,593 |
2022 |  | 74,942 |
2023 |  | 62,639 |
2024 |  | 54,042 |
2025 |  | 47,704 |
Thereafter |  | 152,175 |
| $ | 484,095 |
Delivery Commitments We have various volume delivery commitments that are related to our Marcellus Shale properties. We expect to be able to fulfill our contractual obligations from our own production; however, we may purchase third-party volumes to satisfy our commitments or pay demand fees for commitment shortfalls, should they occur. As of December 31, 2020, our delivery commitments through 2031 were as follows:
Year Ending December 31, |  | Natural Gas (mmbtu per day) |  | Ethane and Propane (bbls per day) |
2021 |  |  | 476,877 |  | 35,000 |
2022 |  |  | 477,679 |  | 35,000 |
2023 |  |  | 292,423 |  | 35,000 |
2024 |  |  | 211,216 |  | 35,000 |
2025 |  |  | 170,000 |  | 35,000 |
2026 |  |  | 158,301 |  | 35,000 |
2027 |  |  | 100,000 |  | 35,000 |
2028 |  |  | 100,000 |  | 35,000 |
2029 |  |  | 100,000 |  | 20,000 |
2030-2031 |  |  | — |  | 20,000 |
In addition to the amounts included in the above table, we have contracted with a pipeline company through 2035 to deliver ethane production volumes from our Marcellus Shale wells. These agreements and related fees, which are contingent upon facility construction and/or modification, are for 3,000 bbls per day starting in 2021 and increasing to 18,000 bbls per day in 2027 and to 25,000 bbls per day in 2029 through 2033 and declining to 10,000 bbls per day for the remainder of the term. Other We also have lease acreage that is generally subject to expiration if initial wells are not drilled within a specified period, generally between three and five years. We do not expect to lose significant lease acreage because of failure to drill due to inadequate capital, equipment or personnel. However, based on our evaluation of prospective economics, we have allowed acreage to expire and will allow additional acreage to expire in the future. To date, our expenditures to comply with environmental or safety regulations have not been a significant component of our cost structure and are not expected to be significant in the future. However, new regulations, enforcement policies, claims for damages or other events could result in significant future costs.

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