Property and Equipment

12 Months Ended

Dec. 31, 2012

Property and Equipment [Abstract]

PROPERTY AND EQUIPMENT

NOTE 3 — PROPERTY AND EQUIPMENT

The following table presents a summary of the Company’s property and equipment balances as of December 31, 2012 and 2011 (in thousands).

	December 31,
	2012			2011
Oil and natural gas properties
Evaluated (subject to amortization)	$	763,527		$	423,945
Unproved and unevaluated (not subject to amortization)
Incurred in 2012		36,488			–
Incurred in 2011		24,138			60,934
Incurred in 2010		70,417			80,593
Incurred in 2009 and prior		18,632			21,071
Total unproved and unevaluated		149,675			162,598
Total oil and natural gas properties		913,202			586,543
Accumulated depletion		(344,609	)		(201,543	)
Net oil and natural gas properties		568,593			385,000
Other property and equipment
Computer equipment		834			787
Furniture		793			458
Software		1,355			1,111
Other equipment		196			194
Leasehold improvements		644			627
Support equipment and facilities		23,436			15,587
Total other property and equipment		27,258			18,764
Accumulated depreciation		(4,761	)		(3,899	)
Net other property and equipment		22,497			14,865
Net property and equipment	$	591,090		$	399,865

The following table provides a breakdown of the Company’s unproved and unevaluated property costs not subject to amortization as of December 31, 2012 and the year in which these costs were incurred (in thousands).

Description	2012		2011		2010		2009 and prior		Total
Costs incurred for
Property acquisition	$	29,165	$	21,748	$	70,417	$	18,632	$	139,962
Exploration wells		4,680		1,932		–		–		6,612
Development wells		2,573		–		–		–		2,573
Capitalized interest		70		458		–		–		528
Total	$	36,488	$	24,138	$	70,417	$	18,632	$	149,675

Property acquisition costs primarily include leasehold costs paid to secure oil and natural gas mineral leases, but may also include broker and legal expenses, geological and geophysical expenses and capitalized internal costs associated with developing oil and natural gas prospects on these properties. Property acquisition costs are transferred into the amortization base on an ongoing basis as these properties are evaluated and proved reserves are established or impairment is determined. Unproved and unevaluated properties are assessed for possible impairment on a periodic basis based upon changes in operating or economic conditions.

Property acquisition costs incurred in 2012 were related primarily to the Company’s leasing and acquisition activities in the Eagle Ford shale play in South Texas and the Wolfcamp and Bone Spring plays in the Delaware Basin in West Texas.

Property acquisition costs incurred in 2011 were related primarily to the Company’s leasing and acquisition activities in the Eagle Ford shale play in South Texas. The 2010 property acquisition costs were related primarily to the Company’s leasing activities in the Eagle Ford shale play in South Texas and the Haynesville shale play in Northwest Louisiana. These costs are associated with acreage for which proved reserves have yet to be assigned. As the Company drills wells and assigns proved reserves to these properties or determines that certain portions of this acreage, if any, cannot be assigned proved reserves, portions of these costs are transferred to the amortization base. The Company estimates that evaluation of most of these properties and the inclusion of their costs in the amortization base is expected to be completed within three to five years.

Property acquisition costs incurred in 2009 and prior years were related primarily to the Company’s leasing activities in the Haynesville shale play in Northwest Louisiana and in Southwest Wyoming, Northeast Utah and Southeast Idaho. During 2011, the Company drilled its first exploration well on its acreage in Southwest Wyoming. We re-entered this vertical well in late 2012 and drilled a horizontal lateral that will be completed in 2013. The Company estimates that evaluation of most of these properties and the inclusion of their costs in the amortization base is expected to be completed within two to four years.

Costs excluded from amortization also include those costs associated with exploration and development wells in progress or awaiting completion at year-end. These costs are transferred into the amortization base on an ongoing basis, as these wells are completed and proved reserves are established or confirmed. These costs totaled $7.3 million at December 31, 2012. Of this total, $4.7 million was associated with exploration wells and $2.6 million was associated with development wells. The Company anticipates that the entire $7.3 million associated with these wells in progress at December 31, 2012 will be transferred to the amortization base during 2013. At December 31, 2012, there were $1.9 million in exploratory well costs excluded from amortization that were incurred in years prior to 2012, all associated with the exploration well in Southwest Wyoming. The Company plans to complete and test this well in 2013 and anticipates that the entire $1.9 million incurred in 2011 will also be transferred to the amortization base during 2013.