Investment in Piceance Energy

9 Months Ended

Sep. 30, 2014

Equity Method Investments and Joint Ventures [Abstract]

Investment in Piceance Energy

Investment in Piceance Energy

We account for our 33.34% ownership interest in Piceance Energy using the equity method of accounting because we are able to exert significant influence, but do not control, its operating and financial policies. Piceance Energy has a $400 million revolving credit facility secured by a lien on its natural gas and oil properties and related assets with a borrowing base currently set at $120 million.  As of September 30, 2014, the balance outstanding on the revolving credit facility was approximately $96 million. We are guarantors of Piceance Energy’s credit facility, with recourse limited to the pledge of our equity interests of our wholly owned subsidiary, Par Piceance Energy Equity LLC ("Par Piceance Energy"). Under the terms of its credit facility, Piceance Energy is generally prohibited from making cash distributions to its owners, including us.

The change in our investment in Piceance Energy is as follows (in thousands):

	Nine Months Ended   September 30, 2014
Beginning balance	$	101,796
Income from Piceance Energy	945
Accretion of basis difference	429
Capitalized drilling costs obligation paid	12
Ending balance	$	103,182

Summarized financial information for Piceance Energy is as follows (in thousands):

	September 30, 2014			December 31, 2013
Current assets	$	7,459		$	5,901
Non-current assets	459,587			454,402
Current liabilities	(13,135		)	(13,040		)
Non-current liabilities	(100,550		)	(96,738		)

	Three Months Ended   September 30, 2014		Three Months Ended   September 30, 2013			Nine Months Ended   September 30, 2014		Nine Months Ended   September 30, 2013
Oil, natural gas and natural gas liquids revenues	$	21,347	$	14,622		$	62,315	$	44,076
Income (loss) from operations	870		(2,088		)	6,468		(3,911		)
Net income (loss)	2,111		(2,721		)	2,835		(5,317		)

Net income for the three and nine months ended September 30, 2014 includes $9.6 million and $24.9 million in depletion, depreciation and amortization ("DD&A") expense and $2.6 million and $2.4 million in unrealized gains on derivative instruments, respectively. The net income (loss) for the three and nine months ended September 30, 2013 includes $6.9 million and $17.6 million in DD&A expense and $210 thousand in unrealized loss and $639 thousand in unrealized gain on derivative instruments, respectively.

At September 30, 2014 and December 31, 2013, our equity in the underlying net assets of Piceance Energy exceeded the carrying value of our investment by approximately $14.9 million and $15.3 million, respectively. This difference arose due to lack of control and marketability discounts and we attributed the difference to natural gas and oil properties and are amortizing the difference over 15 years based on the estimate of proved reserves at the date Piceance Energy was formed.