XML 25 R14.htm IDEA: XBRL DOCUMENT v3.8.0.1
Ceiling Test
9 Months Ended
Sep. 30, 2017
Oil and Gas Exploration and Production Industries Disclosures [Abstract]  
Ceiling Test
Ceiling Test

The Company uses the full cost method to account for its oil and gas properties. Accordingly, the costs to acquire, explore for and develop oil and gas properties are capitalized. Capitalized costs of oil and gas properties, net of accumulated DD&A and related deferred taxes, are limited to the estimated future net cash flows from estimated proved oil and gas reserves, including the effects of cash flow hedges in place, discounted at 10%, plus the lower of cost or fair value of unevaluated properties, as adjusted for related income tax effects (the full cost ceiling). If capitalized costs exceed the full cost ceiling, the excess is charged to ceiling test write-down of oil and gas properties in the quarter in which the excess occurs.

In accordance with SEC requirements, the estimated future net cash flows from estimated proved reserves are based on an average of the first day of the month spot price for a historical 12-month period, adjusted for quality, transportation fees and market differentials. At September 30, 2016, the prices used in computing the estimated future net cash flows from the Company's estimated proved reserves, including the effect of hedges in place at that date, averaged $2.19 per Mcf of natural gas, $39.97 per barrel of oil and $1.66 per Mcfe of Ngl. As a result of lower commodity prices and their negative impact on the Company's estimated proved reserves and estimated future net cash flows, the Company recognized ceiling test write-downs of approximately $8.7 million and $40.3 million, respectively, during the three and nine month periods ended September 30, 2016. The Company's cash flow hedges in place during the three and nine month periods ended September 30, 2016 decreased these ceiling test write-downs by approximately $0.1 million and $1.2 million, respectively. No such write-downs occurred during the three and nine month periods ended September 30, 2017.