NOTE 16 — COMMITMENTS

Pursuant to the 2010 Purchase and Sale Agreement with Total E&P, the Company may fulfill security requirements related to ARO for certain properties through securing surety bonds, or through making payments to an escrow account under a formula pursuant to the agreement, or a combination thereof, until certain prescribed thresholds are met. As of December 31, 2022, the Company had surety bonds related to the agreement totaling $100.4 million and had no amounts in escrow. The threshold escalates to $103.0 million for 2023. There is no further escalation of the threshold after 2023.

Pursuant to the 2010 Purchase and Sale Agreement with Shell Offshore Inc. related to ARO for certain properties, the Company has surety bonds that are subject to re-appraisal by either party. As of December 31, 2022, neither party had requested a re-appraisal to be made. The current security requirement of $64.0 million could be increased up to $94.0 million depending on certain conditions and circumstances.

Pursuant to the 2019 Purchase and Sale Agreement with Exxon related to ARO for certain properties, the Company was required to obtain $36.3 million of surety bonds as of December 31, 2022. This amount increases on June 1 of the following years to $40.0 million - 2023; $44.0 million - 2024; $48.3 million - 2025; $53.2 million - 2026; $58.5 million - 2027, and future increases in increments ranging $5.9 million to $10.4 million per year until the total amount reaches $114.0 million in 2034. The Company may request a redetermination with Exxon every two years by providing certain documentation as provided in the purchase agreement. W&T is required to maintain this scheduled level of bonds until the properties are fully plugged, abandoned, and restored in accordance with applicable laws and regulations.

Pursuant to the 2019 Purchase and Sale Agreement with Conoco related to ARO for certain properties, W&T was required to obtain $49.0 million of surety bonds and is required to maintain this level of bonds until the properties are fully plugged, abandoned, and restored in accordance with applicable laws and regulations.

During 2022, 2021 and 2020, the Company had surety bonds primarily related to decommissioning obligations. Total expenses related to surety bonds, inclusive of the surety bonds in connection with the agreements described above, were $8.3 million, $6.0 million, and $5.4 million during 2022, 2021 and 2020, respectively. Future surety bond costs may change due to a number of factors, including changes and interpretations of regulations by the BOEM, rates being charged in the market place, and timing of when decommissioning obligations are completed.

In conjunction with the purchase of an interest in the Heidelberg field, the Company assumed contracts with certain pipeline companies that contain minimum quantities obligations that extend to 2028. For 2022, 2021 and 2020 expense recognized for the difference between the quantities shipped and the minimum obligations was $1.6 million, $2.1 million and $4.5 million, respectively.

The Company does not have any long-term drilling rig commitments as of December 31, 2022.