Property, Plant and Equipment |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Oil And Gas Property [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Property, Plant and Equipment |
Note 3 — Property, Plant and Equipment Proved Properties. The Company’s interests in proved oil and natural gas properties are located in the U.S., primarily in the Gulf of Mexico deep and shallow waters. The Company follows the full cost method of accounting for its oil and natural gas exploration and development activities. At September 30, 2019, the Company’s ceiling test computation of its U.S. oil and natural gas properties was based on SEC pricing of $63.88 per Bbl of oil, $2.81 per Mcf of natural gas and $24.26 per Bbl of NGLs. During the three and nine months ended September 30, 2019 and 2018, the Company’s ceiling test computation did not result in a write-down of its U.S. oil and natural gas properties. Unproved Properties. Unproved capitalized costs of oil and natural gas properties excluded from amortization relate to unevaluated properties associated with acquisitions, leases awarded in the U.S. Gulf of Mexico federal lease sales, certain geological and geophysical costs, costs associated with certain exploratory wells in progress and capitalized interest. Unproved properties also include costs associated with the two blocks (Block 2 and Block 7) awarded on September 4, 2015 to the Company together with Sierra Oil & Gas S. de R.L de C.V. (“Sierra”) and Premier Oil Plc (“Premier” and collectively, the “Consortium”), located in the shallow waters off the coast of Mexico’s Veracruz and Tabasco states, by the National Hydrocarbons Commission (“CNH”), Mexico’s upstream regulator. On September 4, 2019, the CNH granted a two-year extension under the Consortium’s production sharing contract for Block 7. During any period in which unproved properties are assessed as proved or impaired, the associated costs are transferred to the full cost pool and are subject to amortization. In September 2018, the Company entered into a transaction (the “Hokchi Cross Assignment”) with Hokchi Energy, S.A. de C.V. (“Hokchi”), a subsidiary of Pan American Energy LLC (“PAE”), to cross assign 25% participation interests (“PI”) in each of Block 2 and Block 31. The Company’s assignment of a 25% PI in Block 2 to Hokchi closed on December 21, 2018, and Hokchi’s assignment to the Company closed on May 22, 2019. In addition, Premier exercised its option to reduce its PI in Block 2 to zero and assigned a 5% PI to each of Sierra and Talos. Following the completion of the Hokchi Cross Assignment, Talos owns a 25% PI in each of Block 2 and Block 31, and Hokchi is the operator of the blocks. As a result of the Company’s evaluation of unproved property located in Block 2 offshore Mexico, specifically future exploratory drilling opportunities, results from exploratory wells drilled and the Block 2 production sharing contract’s expiration date, the Company recorded a $1.4 million and $13.8 million non-cash impairment expense for the three and nine months ended September 30, 2019, respectively, presented as “Write-down of oil and natural gas properties” on the condensed consolidated statements of operations. Capitalized Overhead. General and administrative expense in the Company’s financial statements is reflected net of capitalized overhead. The Company capitalizes overhead costs directly related to exploration, acquisition and development activities. Capitalized overhead for the three and nine months ended September 30, 2019 was $7.4 million and $21.4 million, respectively. Capitalized overhead for the three and nine months ended September 30, 2018 was $8.7 million and $16.2 million, respectively. Asset Retirement Obligations. The discounted asset retirement obligations included “Current portion of asset retirement obligations” and “Asset retirement obligations” on the condensed consolidated balance sheets and the changes to that liability during the nine months ended September 30, 2019 were as follows (in thousands):
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