Oil and Gas Producing Activities (Unaudited)

12 Months Ended

Dec. 31, 2019

Oil and Gas Exploration and Production Industries Disclosures [Abstract]

Oil and Gas Producing Activities (Unaudited)

Oil and Gas Producing Activities (Unaudited)Our wholly owned subsidiary, AREC, participated in the exploration and development of domestic crude oil and natural gas properties primarily in the Permian Basin of West Texas and the Haynesville Shale. AREC’s offices were maintained in Houston. As discussed further in Note 4, AREC was deconsolidated effective with its bankruptcy filing in April 2017, and we recorded our investment in AREC under the cost method of accounting in April 2017. During the third quarter of 2017, AREC sold substantially all of its assets. As a result of the sales of these assets, we no longer have an ownership interest in any crude oil and natural gas producing activities. In the disclosures and tables below, amounts for 2017 are for the period from January 1, 2017 through April 30, 2017, the period in which AREC was consolidated with us. We had no further exploration and development activity after April 30, 2017.

Crude Oil and Natural Gas Producing Activities

Total costs incurred in crude oil and natural gas exploration and development activities, all within the U.S., were as follows for the period from January 1, 2017 through April 30, 2017 (in thousands):

Property acquisition costs:
Unproved	$	4
Exploration costs:
Expensed	5
Development costs	1,815
Total costs incurred	$	1,824

Estimated Crude Oil and Natural Gas Reserves

The following information regarding estimates of our proved crude oil and natural gas reserves, substantially all of which were located onshore in Texas and Louisiana, was based on reports prepared on our behalf by our independent petroleum engineers. Because crude oil and natural gas reserve estimates are inherently imprecise and require extensive judgments of reservoir engineering data, they are generally less precise than estimates made in conjunction with financial disclosures.

Proved developed and undeveloped reserves were as follows for the period from January 1, 2017 through April 30, 2017 (in thousands):

	Natural	Crude
	Gas	Oil
	(Mcf)	(Bbls)
Total proved reserves:
Beginning of period	4,214	187
Crude oil and natural gas reserves sold	(4,067)	(170)
Extensions, discoveries and other reserve additions	42	6
Production	(189)	(23)
End of period	—	—

We had developed internal policies and controls for estimating and recording crude oil and natural gas reserve data. The estimation and recording of proved reserves is required to be in compliance with SEC definitions and guidance. We assigned responsibility for compliance in reserve bookings to the office of President of AREC. No portion of this individual’s compensation was directly dependent on the quantity of reserves booked. Reserve estimates are required to be made by qualified reserve estimators, as defined by Society of Petroleum Engineers’ Standards.

We employed a third party petroleum consultant, Ryder Scott Company, to prepare our crude oil and natural gas reserve data estimates as of December 31, 2016. The firm of Ryder Scott has been well recognized within the industry for more than 50 years. As prescribed by the SEC, proved reserves were estimated using 12-month average crude oil and natural gas prices, based on the first-day-of-the-month price for each month in the period, and year-end production and development costs, all without escalation.

The process of estimating crude oil and natural gas reserves is complex and requires significant judgment. Uncertainties are inherent in estimating quantities of proved reserves, including many factors beyond the estimator’s control. Reserve engineering is a subjective process of estimating subsurface accumulations of crude oil and natural gas that cannot be measured in an exact manner, and the accuracy of any reserve estimate is a function of the quality of available data and the interpretation thereof. As a result, assessments by different engineers often vary, sometimes significantly. In addition, physical factors such as the results of drilling, testing and production subsequent to the date of an estimate, as well as economic factors such as changes in product prices, may justify revision of such estimates. Accordingly, crude oil and natural gas quantities ultimately recovered will vary from reserve estimates.

Standardized Measure of Discounted Future Net Cash Flows from Crude Oil and Natural Gas Operations and Changes Therein

The standardized measure of discounted future net cash flows was determined based on the economic conditions in effect at the end of 2016, except in those instances where fixed and determinable gas price escalations were included in contracts. The disclosures below do not purport to present the fair market value of our previously owned crude oil and natural gas reserves. An estimate of the fair market value would also take into account, among other things, the recovery of reserves in excess of proved reserves, anticipated future changes in prices and costs, a discount factor more representative of the time value of money and risks inherent in reserve estimates. The standardized measure of discounted future net cash flows was zero for the period from January 1, 2017 through April 30, 2017.

The estimated value of crude oil and natural gas reserves and future net revenues derived therefrom are highly dependent upon crude oil and natural gas commodity prices. These prices were based on the unweighted arithmetic average of the prices in effect on the first day of the month for each month of the respective twelve month periods as required by SEC regulations. The prices reported in the reserve disclosures for natural gas included the value of associated natural gas liquids. Crude oil and natural gas reserve values and future net cash flow estimates are very sensitive to pricing assumptions and will vary accordingly.

The principal sources of changes in the standardized measure of discounted future net cash flows were as follows for the period from January 1, 2017 through April 30, 2017 (in thousands):

Beginning of period	$	2,260
Sale of crude oil and natural gas reserves	(2,732)
New field discoveries and extensions, net of future production costs	94
Sales of crude oil and natural gas produced, net of production costs	(476)
Accretion of discount	130
Production rate changes and other	(493)
Net change in income taxes	1,217
End of period	$	—

Results of Operations for Crude Oil and Natural Gas Producing Activities

The results of crude oil and natural gas producing activities, excluding corporate overhead and interest costs, were as follows for the period from January 1, 2017 through April 30, 2017 (in thousands):

Revenues	$	1,427
Costs and expenses:
Production	(951)
Depreciation, depletion and amortization	(423)
Operating earnings before income taxes	53
Income tax expense	(19)
Operating earnings	$	34