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Investment in Laramie Energy, LLC | 12 Months Ended
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Dec. 31, 2021
Equity Method Investments and Joint Ventures [Abstract] |
Investment in Laramie Energy, LLC | Investment in Laramie Energy, LLC As of December 31, 2021, we owned a 46.0% ownership interest in Laramie Energy, a joint venture entity focused on developing and producing natural gas in Garfield, Mesa, and Rio Blanco counties, Colorado. As of December 31, 2020, Laramie Energy had a $400.0 million revolving credit facility secured by a lien on its natural gas and crude oil properties and related assets with a borrowing base set at $139.7 million. On November 20, 2020, Laramie Energy amended its revolving credit facility, reducing the borrowing base to $140.0 million, resulting in a borrowing base deficiency of $60.0 million. In conjunction with the borrowing base deficiency, Laramie entered into a forbearance agreement through June 15, 2021 with its lenders. As of December 31, 2020, the balance outstanding on the revolving credit facility was approximately $139.7 million. On July 1, 2021, Laramie Energy entered into a term loan agreement which provided a term loan in the principal amount of $160 million. Laramie Energy used the proceeds from the term loan to repay the outstanding balance on its revolving credit facility. The term loan is secured by a lien on its natural gas and crude oil properties and related assets. Under the terms of the term loan, Laramie Energy is generally prohibited from making future cash distributions to its owners, including us, except for certain permitted tax distributions. Laramie Energy’s term loan matures on July 1, 2025. As of December 31, 2021, the term loan had an outstanding balance of $140.1 million. At March 31, 2020, we conducted an impairment evaluation of our investment in Laramie Energy because of (i) the global economic impact of the COVID-19 pandemic, (ii) an increase in the weighted-average cost of capital for energy companies, and (iii) continuing declines in natural gas prices through the first quarter of 2020. Based on our evaluation, we determined that the estimated fair value of our investment in Laramie Energy was $1.9 million, compared to a carrying value of $47.2 million at March 31, 2020. The fair value estimate was determined using a discounted cash flow analysis based on natural gas forward strip prices as of March 31, 2020 for the years 2020 and 2021 of the forecast, and a blend of forward strip pricing and third-party analyst pricing for the years 2022 through 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 a result, we recorded an other-than temporary impairment charge of $45.3 million in Equity losses from Laramie Energy, LLC on our consolidated statement of operations for the year ended December 31, 2020. Please read Note 15—Fair Value Measurements for further information. During the quarter ended June 30, 2020, Laramie Energy incurred additional losses that reduced the book value of our investment to zero and, as such, as of June 30, 2020, we discontinued the application of the equity method of accounting for our investment in Laramie Energy. During the fourth quarter of 2019, Laramie Energy recorded an impairment loss of $355.2 million associated with the carrying value of proved reserves. As a result of Laramie Energy’s impairment loss and the liquidity impact associated with the previous maturity of the revolving credit facility in December 2020, we updated the impairment evaluation of our investment in Laramie Energy as of December 31, 2019. The fair value estimate was determined using a discounted cash flow analysis based on reserves volumes and natural gas forward strip prices as of December 31, 2019. Based on our evaluation, we determined that the estimated fair value of our investment in Laramie Energy approximated carrying value as of December 31, 2019. 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. Based on our evaluation, 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 at September 30, 2019. 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. Based on the significant decline in natural gas prices and the reduced likelihood that natural gas prices would recover in the near term, we concluded that the decline in the fair value of our investment in Laramie Energy was other than temporary. As a result, we recorded an impairment charge of $81.5 million in Equity earnings (losses) from Laramie Energy, LLC on our consolidated statement of operations for the year ended December 31, 2019. Please read Note 15—Fair Value Measurements for further information. On March 4, 2019, Laramie entered into a binding agreement to divest an insignificant amount of producing property for approximately $17.5 million. This divestiture did not result in a change in our ownership percentage. The change in our equity investment in Laramie Energy is as follows (in thousands):
|  |  | Year Ended December 31,
|  |  | 2020 |  | 2019
Beginning balance |  |  | $ | 46,905 |  |  | $ | 136,656 |
Equity earnings (losses) from Laramie Energy (1) |  |  | (1,611) |  |  | (175,018) |
Accretion of basis difference |  |  | — |  |  | 5,018 |
Adjustment of basis difference (2) |  |  | — |  |  | 161,764 |
Impairment of our investment in Laramie Energy |  |  | (45,294) |  |  | (81,515) |
Ending balance (1) |  |  | $ | — |  |  | $ | 46,905 |
________________________________________________________ (1)As of June 30, 2020, we have discontinued the application of the equity method of accounting for our investment in Laramie Energy because the book value of such investment has been reduced to zero. (2)Represents the reduction in our basis difference resulting from the asset impairment loss recorded by Laramie Energy for the year ended December 31, 2019. Summarized financial information for Laramie Energy is as follows (in thousands):
| December 31,
| 2021 |  | 2020
| (Unaudited) |  |
Current assets | $ | 68,779 |  |  | $ | 34,573 |
Non-current assets | 328,571 |  |  | 355,538 |
Current liabilities | 107,976 |  |  | 217,523 |
Non-current liabilities | 177,503 |  |  | 93,193 |
| Year Ended December 31,
| 2021 |  | 2020 |  | 2019
| (Unaudited) |  |  |  |
Natural gas and oil revenues | $ | 221,176 |  |  | $ | 121,893 |  |  | $ | 193,906 |
Income (loss) from operations | 99,133 |  |  | (2,994) |  |  | (360,967) |
Net income (loss) | 32,476 |  |  | (22,589) |  |  | (380,473) |
Laramie Energy’s net income (loss) includes (in thousands):
| Year Ended December 31,
| 2021 |  | 2020 |  | 2019
| (Unaudited) |  |  |  |
Asset impairment loss | $ | — |  |  | $ | — |  |  | $ | 355,220 |
Depreciation, depletion, and amortization | 26,458 |  |  | 34,966 |  |  | 82,632 |
Unrealized (gain) loss on derivative instruments | 32,417 |  |  | 4,245 |  |  | (4,283) |

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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 323 -URI http://asc.fasb.org/topic&trid=2196965 + Details
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