Deferred Revenue

3 Months Ended

Mar. 31, 2012

Deferred Revenue [Abstract]

Deferred Revenue

NOTE M. Deferred Revenue

The Company's remaining volumetric production payment ("VPP") represents a limited-term overriding royalty interest in oil reserves that: (i) entitles the purchaser to receive production volumes over a period of time from specific lease interests, (ii) is free and clear of all associated future production costs and capital expenditures associated with the reserves, (iii) is nonrecourse to the Company (i.e., the purchaser's only recourse is to the reserves acquired), (iv) transferred title of the reserves to the purchaser and (v) allows the Company to retain the remaining reserves after the VPP's volumetric quantities have been delivered.

At the inception of the VPP agreement, the Company (i) removed the proved reserves associated with the VPP, (ii) recognized VPP proceeds as deferred revenue which are being amortized on a unit-of-production basis to oil revenues over the remaining term of the VPP, (iii) retained responsibility for 100 percent of the production costs and capital costs related to VPP interests and (iv) no longer recognizes production associated with the VPP volumes.

The following table provides information about changes in the deferred revenue carrying value of the Company's VPP (in thousands):

Deferred revenue at December 31, 2011	$	42,069
Less: 2012 amortization		(10,459	)
Deferred revenue at March 31, 2012	$	31,610

The remaining $31.6 million of deferred revenue will be recognized in oil revenues in the consolidated statements of operations in 2012, assuming the related VPP production volumes are delivered as scheduled.