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Ceiling Test
9 Months Ended
Sep. 30, 2011
Ceiling Test [Abstract] 
Ceiling Test
Note 7 — Ceiling Test
The Company uses the full cost method to account for its oil and gas operations. 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 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 unproved 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.
As a result of higher estimated future development costs and low natural gas prices and their negative impact on certain of the Company’s longer-lived estimated proved reserves and estimated future net cash flows, at March 31 and June 30, 2011, the Company recognized ceiling test write-downs of $5.9 million and $13.0 million, respectively.