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Commitments and Contingencies | 12 Months Ended
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Dec. 31, 2021
Commitments and Contingencies Disclosure [Abstract] |
Commitments and Contingencies | Commitments and Contingencies From time to time, we may be a plaintiff or defendant in a pending or threatened legal proceeding arising in the normal course of business. We are currently unaware of any proceedings that, in the opinion of management, will individually or in the aggregate have a material adverse effect on our financial position, results of operations or cash flows. We are subject to extensive federal, state and local environmental laws and regulations. These laws regulate the discharge of materials into the environment and may require us to remove or mitigate the environmental effects of the disposal or release of petroleum or chemical substances at various sites. We believe we are currently in compliance with all applicable federal, state and local regulations. Accordingly, no liability or loss associated with environmental remediation was recognized as of December 31, 2021 except for the following: We were engaged with the Environmental Protection Agency (EPA) for alleged violations of the Clean Water Act between 2016 and 2018. We have settled these allegations with the EPA and have recorded $1.4 million as a liability and expense at December 31, 2020, all of which was paid during 2021. On February 14, 2022, the New Mexico Energy, Minerals and Natural Resources Department’s Oil Conservation Division announced a civil penalty of $913,200 to Contango for failure to file form C-115 according to required deadlines and having too many inactive wells. The parties are discussing a resolution to the matter. Following the filing of the preliminary joint proxy statement/prospectus related to the Merger Transactions on July 26, 2021, four lawsuits have been filed in the United States District Court for the Southern District of New York, and one lawsuit has been filed in the United States District for the Eastern District of New York, each in connection with the Merger Transactions (the “Shareholder Actions”): Stein v. Contango Oil & Gas Co., et al., No. 1:21-cv-06769 (S.D.N.Y. Aug. 11, 2021) (the “Stein Action”); Prus v. Contango Oil & Gas Co., et al., No. 1:21-cv-04656 (E.D.N.Y. Aug. 18, 2021) (the “Prus Action”); Whitfield v. Contango Oil & Gas Co., et al., No. 1:21-cv-0700 (S.D.N.Y. Aug. 19, 2021) (the “Whitfield Action”); Byerly v. Contango Oil & Gas Co., et al., 1:21-cv-07327 (S.D.N.Y. Aug. 31, 2021) (the “Byerly Action”); Provost v. Contango Oil & Gas Co., et al., 1:21-cv-07874 (S.D.N.Y. Sept. 21, 2021) (the “Provost Action”). Each of the Shareholder Actions names Contango and the members of the Contango board as defendants, and the Whitfield Action names Independence Energy, LLC, OpCo, Crescent Energy Company (f/k/a IE PubCo Inc.) and other affiliates as additional defendants. Each of the Shareholder Actions alleges, among other things, that the registration statement on Form S-4 filed by IE PubCo Inc. on July 26, 2021 in connection with the Merger Transactions (the “Registration Statement”) is false and misleading and/or omits certain information allegedly material to Contango shareholders in violation of Sections 14(a) and 20(a) of the Securities and Exchange Act of 1934 (as amended, the “Exchange Act”) and Rule 14a-9 promulgated thereunder. The plaintiffs in the Shareholder Actions seek, among other relief, an injunction enjoining the Merger Transactions unless and until the defendants disclose the allegedly omitted material information, a rescission of the Contango Agreement to the extent already implemented (or an award of rescissory damages), an order directing the defendants to account for all damages resulting from the alleged wrongdoing, and an award of plaintiffs’ attorneys’ and experts’ fees and other relief. The Byerly Action also requests that the court determine that the lawsuit is a proper class action and certify Byerly as class representative and his counsel as class counsel. On September 20, 2021, the court consolidated the Stein and Whitfield Actions with the Byerly Action. On October 13, 2021, the court consolidated the Provost Action with the Byerly Action. Contango has also received a demand letter sent on behalf of Catherine Coffman, a purported Contango shareholder. The letter demanded that Contango make supplemental disclosures to investors regarding the Merger Transactions based on factual and legal arguments that are substantially similar to those in the Stein, Prus, Whitfield, Byerly, and Provost Actions. On November 26, 2021, in order to avoid the risk of the Shareholder Actions delaying the Merger Transactions and to minimize the expense of defending the Shareholder Actions, and without admitting any liability or wrongdoing, Contango and Independence voluntarily made certain disclosures that supplement those contained in the joint proxy statement/prospectus. Thereafter, plaintiffs filed voluntary notices of dismissal dismissing the Whitfield and Prus Actions. Pursuant to a scheduling order issued in the consolidated Byerly Action, plaintiff is required to file a Consolidated Amended Complaint within 10 days of an order appointing Byerly as lead plaintiff in the consolidated action. We believe that the Shareholder Actions are without merit and, along with the individual and other defendants intend to defend against the Shareholder Actions; however, Crescent cannot predict the amount of time and expense that will be required to resolve the Shareholder Actions nor their outcomes. Additional lawsuits arising out of or related to the Merger Transactions may also be filed in the future. At December 31, 2021, we had no amounts reserved on our consolidated balance sheet related to this matter. Oil Gathering Agreement In connection with the execution of an oil gathering agreement with a midstream service provider, we received ownership in a Series D class of equity in the midstream service provider. The Series D units do not give us voting or other control rights, but do provide us with an incentive distribution right if other unit classes receive distributions equal to contributed capital plus targeted rates of return. We account for the Series D units through the fair value option available under ASC 825, Financial Instruments. As of December 31, 2021 and 2020, we have concluded the fair value of our investment is not material, based on the nature of the Series D units and overall risk inherent in receiving future cash flows given the stage of development of the entity and required return hurdles. Carbon Dioxide Purchase Agreement We assumed one take-or-pay carbon dioxide purchase agreement as part of a prior acquisition. The agreement includes a minimum volume commitment to purchase carbon dioxide at a price stipulated in the contract. The agreement provides carbon dioxide for use in our enhanced recovery projects in certain of our properties. The daily minimum volume commitments are 140 MMcf/per day from June 2021 to May 2026, with the commitment effectively ending in May 2026. We expect to purchase more carbon dioxide through the end of the agreement in 2026 than our minimum volume commitments, and, in accordance with the agreement, if we do not meet our minimum volume commitments for a year (or years), we can make up the volumes in future years through 2029 as long as we pay for our minimum volumes each year. As of December 31, 2021 and 2020, we have met required minimum volumes. Oil and Natural Gas Transportation and Gathering Agreements We have entered into certain oil and natural gas transportation and gathering agreements with various pipeline carriers. Under these agreements, we are obligated to ship minimum daily quantities or pay for any deficiencies at a specified rate. We are also obligated under certain of these arrangements to pay a demand charge for firm capacity rights on pipeline systems regardless of the amount of pipeline capacity that we utilize. If we do not utilize the capacity, we can release it to others, thus reducing our potential liability. We recognized $5.8 million, $14.5 million and $1.9 million of transportation expense in our combined and consolidated statements of operations related to minimum volume deficiencies for the years ended December 31, 2021, 2020 and 2019, respectively. The following table summarizes our future commitments related to these oil and natural gas transportation and gathering agreements as of December 31, 2021:
| As of December 31, 2021
| (in thousands)
2022 | $ | 105,606 |
2023 | 80,340 |
2024 | 65,848 |
2025 | 61,346 |
2026 | 32,652 |
Thereafter | 62,957 |
Total minimum future commitments | $ | 408,749 |

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