Oil and gas and related activities represent long-term obligations associated with exploration,
development and production activities. We have entered into commitments for oil and gas gathering
and transportation, drilling rig and oilfield services and the design, construction and operation of a
produced water reclamation facility totaling approximately $456.1 million. Through our ownership in
Lucius, we have a commitment of approximately $314.3 million for our share of certain long lead
equipment orders and detailed engineering work.
Asset retirement obligations represent the estimated liability with respect to the retirement/
abandonment of our oil and gas properties. Each reporting period the liability is accreted to its then
present value. The ultimate settlement amount and the timing of the settlement of such obligations are
unknown because they are subject to, among other things, federal, state and local regulation and
economic factors.
The obligation for commodity derivative contracts represents the deferred premium cost and
interest on our crude oil put options and collars and natural gas put options and collars that will be paid
when such options are settled.
Stock compensation awards represent the net liability for the deemed vested portion of our stock
appreciation rights, or SARs. The liability at December 31, 2011 is calculated based on our closing
stock price and other factors at that date. The ultimate settlement amount of such liability is unknown
because settlements will be based on the market price of our common stock at the time the SARs are
exercised. See Critical Accounting Policies and Estimates – Stock-based Compensation.
Tax uncertainties represent the potential cash payments related to uncertain tax positions taken or
expected to be taken in a tax return and include the interest related to the uncertain tax positions.
Other obligations primarily represent our commitments for various service contracts and aircraft
maintenance contracts.
Environmental Matters
. As discussed under Items 1 and 2 – Business and Properties –
Regulation – Environmental, as an owner or lessee and operator of oil and gas properties, we are
subject to various federal, state and local laws and regulations relating to discharge of materials into,
and protection of, the environment. Often these regulations are more burdensome on older properties
that were operated before the regulations came into effect such as some of our properties in California
that have operated for over 100 years. We have established policies for continuing compliance with
environmental laws and regulations. We also maintain insurance coverage which we believe is
customary in the industry for environmental matters, but we are not fully insured against all
environmental risks. There can be no assurance that current or future local, state or federal rules and
regulations will not require us to spend material amounts to comply with such rules and regulations.
Plugging, Abandonment and Remediation Obligations.
Consistent with normal industry practices,
substantially all of our oil and gas leases require that, upon termination of economic production, the
working interest owners plug and abandon non-producing wellbores, remove tanks, production
equipment and flow lines and restore the wellsite. Typically, when producing oil and gas assets are
purchased, the purchaser assumes the obligation to plug and abandon wells that are part of such
assets. However, in some instances, we have received an indemnity with respect to those costs. We
cannot be assured that we will be able to collect on these indemnities.
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