Commitments and Contingencies |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2015 | |||||||||||||||||||||||||||||||||||||||||
| Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||
| Commitments and Contingencies |
Note 14 - Commitments and Contingencies
Operating leases. The following table summarizes the Company's future minimum rental commitments under non-cancelable operating leases, net of guaranteed sublease income, as of June 30, 2015:
Rent expense, recorded gross of sublease income in the accompanying consolidated statements of operations, for each of the years ended June 30, 2015, and 2014, was $0.3 million and $0.3 million, respectively.
Contingent production payments. In September 2011, the Company entered into a Purchase and Sale Agreement (the "Nautilus PSA") among the Company and the non-controlling interest owners of NP for the Company's acquisition of the sellers' interests in NP. The Nautilus PSA provides for potential future contingent production payments, payable by the Company in cash to the sellers, of up to a total of $5.0 million if certain increased average daily production rates for the underlying properties are achieved. J. Thomas Wilson, a director and chief executive officer of the Company, has an approximate 52% interest in such contingent payments. See Note 7 - Fair Value Measurements above for information regarding the estimated discounted fair value of the future contingent consideration payable related to the Nautilus PSA.
Sopak Collateral Agreement. The Company has estimated that there is the potential for a statutory liability of approximately $1.7 million and $1.6 million as of June 30, 2015, and 2014, respectively, related to US Federal tax withholdings and related penalties and interest related to the Collateral Agreement described in Note 11 - Stockholders' Equity. As a result, we have recorded a total liability of $1.7 million and $1.6 million as of June 30, 2015, and 2014, respectively, under accrued and other liabilities in the consolidated balance sheets included in this report. The Company has a legally enforceable right to collect from Sopak any amounts owed to the IRS as a result of the Collateral Agreement. As a result, we have recorded a corresponding receivable of $1.7 million and $1.6 million as of June 30, 2015, and 2014, respectively, under prepaid and other assets in the accompanying consolidated balance sheets.
Celtique Litigation. On March 3, 2015, MPUK received a claim form and particulars of claim that was issued in the High Court of Justice, Queen’s Bench Division, Commercial Court in London, England on February 26, 2015, pursuant to which Celtique Energie Weald Limited ("Celtique") as the claimant seeks, among other things, a declaration that MPUK’s 50% equal co-ownership rights with Celtique in PEDLs 231, 234 (within which license area the Broadford Bridge-1 well site is located), and 243 in the central Weald Basin in the UK have been forfeited to Celtique, and payment of £1.5 million (equivalent to $2.4 million as of June 30, 2015) for the outstanding cash calls related to the Broadford Bridge-1 well along with interest on that amount at 5% above base rate until payment (the "Celtique Claim").
On March 24, 2015 Celtique filed for summary judgment on the Celtique Claim. On April 1, 2015, MPUK filed a defense and counterclaim asserting, among other things, that the cash calls by Celtique are not valid due to the failure of Celtique as operator of the PEDLs to comply with the contractual accounting procedures, adhere to an agreed-upon drilling schedule and otherwise properly execute the parties’ development plans, and seeking to recover damages from Celtique as a result of Celtique’s unilateral actions following the purported forfeiture of the PEDL interests. On June 15, 2015, Celtique’s application for summary judgment was heard and dismissed on the basis that MPUK had a real prospect of successfully defending against the Celtique Claim. Celtique was ordered to pay MPUK’s costs of responding to the application, assessed at £60,000 (equivalent to $94 thousand as of June 30, 2015), which was paid by Celtique on June 29, 2015.
MPUK believes that it has strong defenses and intends to vigorously contest the Celtique Claim. However, due to the early stage of this matter and the uncertainty and risks inherent in litigation, the Company cannot predict an ultimate outcome. As such, a meaningful estimate of a reasonably possible loss, if any, or range of reasonably possible losses, if any, cannot be made as of the date of these consolidated financial statements. The Company has approximately $953 thousand in capitalized costs related to these two licenses included in the accompanying consolidated balance sheet.
Utah CO2 Option. In May 2015, in accordance with an option agreement between Magellan, Utah CO2, and Savoy Energy, LLC ("Savoy"), Utah CO2 exercised the CO2 purchase option available under the Utah CO2 Option Agreement. Exercise of the CO2 purchase option allows Utah CO2 to negotiate in good faith and enter into a purchase agreement for CO2 with Savoy, the key terms of which should be consistent with the terms detailed in the Utah CO2 Option Agreement, which included a fifty year term, an attractive CO2 price per mcf, the exclusive access to CO2 volumes recoverable from Farnham Dome for CO2-EOR projects in Utah, and no CO2 purchase obligations for the first three years.
NT/P82 Seismic Survey. In June 2015, the Australian Commonwealth-Northern Territory Offshore Petroleum Joint Authority and the National Offshore Petroleum Titles Administrator ("NOPTA") approved a variation in MPA's work program commitments under the NT/P82 permit in the Bonaparte basin. In addition to retaining the requirement for geotechnical studies to be completed on or before May 12, 2015, at an estimated cost of AUD $500 thousand, the new work program commitment replaced the commitment to drill an exploration well on or before May 12, 2016, carrying an estimated cost of AUD $25 million, with the requirement to complete a minimum of 600 km2 3-D seismic survey on or before May 12, 2016, the cost of which seismic survey is estimated at AUD $16 million. NOPTA also advised that a suspension and extension of the work requirement for the permit years ending May 12, 2015, and 2016, may be considered, and any renewal application will be expected to include plans for drilling of an exploratory well.
Petrie Engagement. In June 2015, the Special Committee engaged Petrie Partners, LLC ("Petrie") to act as its financial advisor (the "Petrie Engagement"). Under the terms of the Petrie Engagement, the Company has agreed to pay Petrie certain fees contingent upon the successful closing of certain transactions ranging from $0 to 3% of the value of such transaction, together with reimbursement of expenses. The Petrie Engagement may be terminated by either party with 5 days written notice.
Poplar CO2-EOR Pilot Bonus. Mi3 Petroleum Engineering ("Mi3") is a Golden, Colorado, based petroleum engineering firm that advises the Company with respect to its CO2-EOR activities, including the Company's CO2-EOR pilot at Poplar (See Note 15 - Related Party Transactions). Pursuant to the terms of a master services contract with Mi3, in addition to contracted rates for services performed, certain contingent bonuses may become payable to Mi3. The first of these will become payable upon a decision by the Company to pursue a full-field CO2-EOR development at Poplar and is estimated at $365 thousand as of June 30, 2015. The remainder of the bonuses are based on triggers related to project funding and full-field production rates.
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