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Commitments and Contingencies | 3 Months Ended
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Mar. 31, 2024
Commitments and Contingencies Disclosure [Abstract] |
Commitments and Contingencies | Note 13 — Commitments and Contingencies Performance Obligations Regulations with respect to the Company's operations govern, among other things, engineering and construction specifications for production facilities, safety procedures, plugging and abandonment of wells and removal of facilities in the U.S. Gulf of Mexico. As of March 31, 2024, the Company had secured performance bonds from third party sureties totaling $1.5 billion. The cost of securing these bonds is reflected as “Interest expense” on the Condensed Consolidated Statements of Operations. Additionally, as of March 31, 2024, the Company had secured letters of credit issued under its Bank Credit Facility totaling $10.8 million. Letters of credit that are outstanding reduce the available revolving credit commitments. See Note 7 — Debt for further information on the Bank Credit Facility. Firm Transportation Commitments In connection with the QuarterNorth Acquisition, the Company assumed a firm transportation agreement with a pipeline carrier for future transportation of oil production from the Katmai Field. Under the firm agreement, we are obligated to transport a minimum monthly oil volume or pay for any deficiencies. The future minimum transportation under the Company’s commitment totals approximately $22.0 million for years 2025 through 2028. Our production is currently expected to exceed the minimum monthly volume in the periods provided in the agreement. Legal Proceedings and Other Contingencies From time to time, the Company is involved in litigation, regulatory examinations and administrative proceedings primarily arising in the ordinary course of business in jurisdictions in which the Company does business. Although the outcome of these matters cannot be predicted with certainty, the Company’s management believes none of these matters, either individually or in the aggregate, would have a material effect upon the Company’s financial position; however, an unfavorable outcome could have a material adverse effect on the Company’s results from operations for a specific interim period or year. U.S. Specialty Insurance Company (“USSI”) has issued approximately $80.0 million in surety bonds on behalf of QuarterNorth, as Principal. USSI claims that collateral equivalent to the amount of the bonds is now required due to the merger of QuarterNorth into the Company. On March 20, 2024, USSI filed suit to require QuarterNorth to provide collateral in the amount of the bonds to secure QuarterNorth’s alleged obligations owed to USSI. Furthermore, USSI has notified certain purchasers of QuarterNorth’s production that USSI believes QuarterNorth is in default of its obligations and has requested that payment for production that is owed to QuarterNorth be made to USSI. Certain buyers of QuarterNorth’s production have withheld payment to QuarterNorth until this matter is resolved. The Company expects to replace most or all of the bonds issued by USSI during the second quarter of 2024, which will substantially or fully resolve this matter. In June 2019, David M. Dunwoody, Jr., former President of EnVen, filed a lawsuit against EnVen in Texas District Court alleging that the circumstances of his resignation entitled him to the severance payments and benefits under his employment agreement dated as of November 6, 2015 as a resignation for “Good Reason.” The litigation was assumed as part of the EnVen Acquisition. The Company paid the judgment of $14.4 million, inclusive of Mr. Dunwoody’s legal fees and interest, during the three months ended March 31, 2024. Decommissioning Obligations The Company, as a co-lessee or predecessor-in-interest in oil and natural gas leases located in the U.S. Gulf of Mexico, is in the chain of title with unrelated third parties either directly or by virtue of divestiture of certain oil and natural gas assets previously owned and assigned by our subsidiaries. Certain counterparties in these divestiture transactions or third parties in existing leases have filed for bankruptcy protection or undergone associated reorganizations and may not be able to perform required abandonment obligations. Regulations or federal laws could require the Company to assume such obligations. The Company reflects such costs as “Other operating (income) expense” on the Condensed Consolidated Statements of Operations. The decommissioning obligations are included in the Condensed Consolidated Balance Sheets as “Other current liabilities” and “Other long-term liabilities” and the changes in that liability were as follows (in thousands):
| March 31, 2024 |  | December 31, 2023 |
Balance, beginning of period | $ | 15,564 |  | $ | 54,269 |
Additions |  | — |  |  | 266 |
Obligations assumed |  | 1,326 |  |  | — |
Changes in estimate |  | 855 |  |  | 11,613 |
Settlements |  | (3,506 | ) |  | (50,584 | )
Balance, end of period | $ | 14,239 |  | $ | 15,564 |
Less: Current portion |  | 4,000 |  |  | 3,280 |
Long-term portion | $ | 10,239 |  | $ | 12,284 |
Although it is reasonably possible that the Company could receive state or federal decommissioning orders in the future or be notified of defaulting third parties in existing leases, the Company cannot predict with certainty, if, how or when such orders or notices will be resolved or estimate a possible loss or range of loss that may result from such orders. However, the Company could incur judgments, enter into settlements or revise its opinion regarding the outcome of certain notices or matters, and such developments could have a material adverse effect on its results of operations in the period in which the amounts are accrued and its cash flows in the period in which the amounts are paid.

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