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Investment in Laramie Energy, LLC | 9 Months Ended
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Sep. 30, 2019
Equity Method Investments and Joint Ventures [Abstract] |
Investment in Laramie Energy, LLC | Investment in Laramie Energy, LLC As of September 30, 2019, we had a 46.0% ownership interest in Laramie Energy. Laramie Energy is focused on producing natural gas in Garfield, Mesa, and Rio Blanco Counties, Colorado. Laramie Energy has a $400 million revolving credit facility with a borrowing base currently set at $240 million that is secured by a lien on its natural gas and crude oil properties and related assets. As of September 30, 2019, the balance outstanding on the revolving credit facility was approximately $204.7 million. We are guarantors of Laramie Energy’s credit facility, with recourse limited to the pledge of our equity interest of our wholly owned subsidiary, Par Piceance Energy Equity, LLC. Under the terms of its credit facility, Laramie Energy is generally prohibited from making future cash distributions to its owners, including us. At September 30, 2019, we conducted an impairment evaluation of our investment in Laramie Energy because of the significant decline in natural gas prices over the second quarter of 2019 and continued deterioration in the third quarter of 2019. We evaluate equity method investments for impairment when factors indicate that a decrease in the value of our investment has occurred and the carrying amount of our investment may not be recoverable. An impairment loss, based on the difference between the carrying value and the estimated fair value of the investment, is recognized in earnings when an impairment is deemed to be other than temporary. At September 30, 2019, we determined that the estimated fair value of our investment in Laramie Energy was $51.8 million, compared to a carrying value of $133.3 million. The fair value estimate was determined using a discounted cash flow analysis based on natural gas forward strip prices as of September 30, 2019 for two years through December 31, 2021. A blend of 2021 forward strip pricing and third-party analyst pricing was used for years after 2021 through December 31, 2028. Other significant inputs used in the discounted cash flow analysis included proved and unproved reserves information, forecasts of operating expenditures, and the applicable discount rate. As part of our evaluation, we considered the likelihood that Colorado Interstate Gas (CIG) prices, which have declined from an average spot price of $2.48 ($/MMBtu) in the first quarter of 2019, to $1.84 ($/MMBtu) in the second quarter of 2019 and $1.77 ($/MMBtu) in the third quarter of 2019, will recover in the near term. Based on the significant decline in natural gas prices over the past six months and the reduced likelihood that natural gas prices will recover in the near term, we concluded that the decline in the fair value of our investment in Laramie Energy is other than temporary. As a result, we have recorded an impairment charge of $81.5 million on our statement of operations for the three months ended September 30, 2019. The decline in the estimated fair value of our investment in Laramie Energy and the resulting impairment charge is larger than previously disclosed primarily due to the continued decline in natural gas prices during the third quarter of 2019 and the impact of lower than expected prices on the value of Laramie Energy’s proved and unproved reserves. The change in our equity investment in Laramie Energy is as follows (in thousands):
| Nine Months Ended September 30, 2019
Beginning balance | $ | 136,656 |
Equity losses from Laramie Energy | (8,344 | )
Accretion of basis difference | 5,018 |
Impairment | (81,515 | )
Ending balance | $ | 51,815 |
Summarized financial information for Laramie Energy is as follows (in thousands):
| September 30, 2019 |  | December 31, 2018
Current assets | $ | 16,704 |  |  | $ | 28,569 |
Non-current assets | 763,583 |  |  | 788,515 |
Current liabilities | 29,332 |  |  | 41,681 |
Non-current liabilities | 286,623 |  |  | 293,084 |
| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2019 |  | 2018 |  | 2019 |  | 2018
Natural gas and oil revenues | $ | 38,967 |  |  | $ | 58,557 |  |  | $ | 150,161 |  |  | $ | 151,988 |
Income (loss) from operations | (10,028 | ) |  | 6,152 |  |  | (4,490 | ) |  | 11,642 |
Net loss | (12,586 | ) |  | (152 | ) |  | (18,139 | ) |  | (1,708 | )
Laramie Energy’s net loss for the three and nine months ended September 30, 2019 includes $20.7 million and $63.1 million of depreciation, depletion, and amortization (“DD&A”) and $4.3 million of unrealized losses and $6.8 million of unrealized gains on derivative instruments, respectively. Laramie Energy’s net loss for the three and nine months ended September 30, 2018 includes $20.7 million and $52.7 million of DD&A and $3.2 million and $6.7 million of unrealized losses on derivative instruments, respectively. At September 30, 2019 and December 31, 2018, our equity in the underlying net assets of Laramie Energy exceeded the carrying value of our investment by approximately $161.8 million and $85.2 million, respectively. This difference arose primarily due to lack of control and marketability discounts and other-than-temporary impairments of our equity investment in Laramie Energy.

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- Definition The entire disclosure for equity method investments and joint ventures. Equity method investments are investments that give the investor the ability to exercise significant influence over the operating and financial policies of an investee. Joint ventures are entities owned and operated by a small group of businesses as a separate and specific business or project for the mutual benefit of the members of the group. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 810 -SubTopic 10 -Section S99 -Paragraph 4 -Subparagraph (SX 210.3A-04) -URI http://asc.fasb.org/extlink&oid=116822174&loc=d3e355119-122828 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 323 -URI http://asc.fasb.org/topic&trid=2196965 + Details
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