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FAIR VALUE MEASUREMENTS | 12 Months Ended
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Dec. 31, 2016
Fair Value Disclosures [Abstract] |
FAIR VALUE MEASUREMENTS |
15. | FAIR VALUE MEASUREMENTS
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining fair value, the Company uses various methods including market, income and cost approaches. Based on these approaches, the Company often utilizes certain assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable inputs. The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Based on the observability of the inputs used in the valuation techniques the Company is required to provide the following information according to the fair value hierarchy. The fair value hierarchy ranks the quality and reliability of the information used to determine fair values. Financial assets and liabilities carried at fair value will be classified and disclosed in one of the following three categories: Level 1 - Quoted prices for identical assets and liabilities traded in active exchange markets, such as the New York Stock Exchange. Level 2 - Observable inputs other than Level 1 including quoted prices for similar assets or liabilities, quoted prices in less active markets, or other observable inputs that can be corroborated by observable market data. Level 2 also includes derivative contracts whose value is determined using a pricing model with observable market inputs or can be derived principally from or corroborated by observable market data. Level 3 - Unobservable inputs supported by little or no market activity for financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation; also includes observable inputs for nonbinding single dealer quotes not corroborated by observable market data. The Company has processes and controls in place to attempt to ensure that fair value is reasonably estimated. The Company performs due diligence procedures over third-party pricing service providers in order to support their use in the valuation process. Where market information is not available to support internal valuations, independent reviews of the valuations are performed and any material exposures are evaluated through a management review process. While the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. The following is a description of the valuation methodologies used for complex financial instruments measured at fair value: Oil Price Risk Derivative Valuation Methodologies The Company determines its estimate of the fair value of derivative instruments using a market approach based on several factors, including quoted market prices in active markets, quotes from third parties, the credit rating of the counterparty and the Company’s own credit rating. In consideration of counterparty credit risk, the Company assessed the likelihood that the counterparty to the derivative would default by failing to make any contractually required payments. Additionally, the Company considers that it is of substantial credit quality and has the financial resources and willingness to meet its potential repayment obligations associated with the derivative transactions. There were no derivative contracts in place at December 31, 2016. The crude oil derivative markets are highly active. Although the Company’s derivative instruments are valued using indices, the instruments themselves are traded with third-party counterparties and are not openly traded on an exchange. As such, the Company has classified these instruments as Level 2. Warrant Valuation Methodologies The warrants issued by the Company are classified as liabilities on the balance sheet because the warrants contain a contingent put and other liability type provisions. The shares underlying the warrants are contingently redeemable and are subject to remeasurement at each balance sheet date, and any changes in fair value will be recognized as a component of other (expense) income on the accompanying consolidated statements of operations. The Company estimated the value of the warrants issued with the Securities Purchase Agreement on December 22, 2016, the date of issuance, to be $1,240,000 using a Monte Carlo model. As of December 31, 2016, the fair value of the warrants was $1,030,000 and was recorded as a liability on the accompanying balance sheet. An increase in any of the model variables would cause an increase in the fair value of the warrants. Likewise, a decrease in any model variable would cause a decrease in the value of the warrants. Marketable Equity Securities Valuation Methodologies The fair value of available for sale securities is based on quoted market prices obtained from independent pricing services. Accordingly, the Company has classified these instruments as Level 1. Executive Retirement Liability Valuation Methodologies The executive retirement program is a standalone liability for which there is no available market price, principal market, or market participants. The Company records the estimated fair value of the long-term liability for estimated future payments under the executive retirement program based on the discounted value of estimated future payments associated with each individual in the program. The inputs available for this estimate are unobservable and are therefore classified as Level 3 inputs. Other Financial Instruments The carrying amount of cash and equivalents, oil and gas sales receivable, other current assets, accounts payable and accrued expenses approximate fair value because of the short-term nature of those instruments. The recorded amounts for the Senior Secured Revolving Credit Facility discussed in Note 7 approximates the fair market value due to the variable nature of the interest rates, and the fact that market interest rates have remained substantially the same since the latest amendment to the credit facility. Recurring Fair Value Measurements Recurring measurements of the fair value of assets and liabilities as of December 31, 2016 and 2015 are as follows:
|  | December 31, 2016 |  |  | December 31, 2015 |
|  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Total |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Total |
Marketable equity securitites: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Sutter Gold Mining Company(1) |  | $ | - |  |  | $ | 16 |  |  | $ | - |  |  | $ | 16 |  |  | $ | - |  |  | $ | 13 |  |  | $ | - |  |  | $ | 13 |
Anfield Resources, Inc. (2) |  |  | 930 |  |  |  | - |  |  |  | - |  |  |  | 930 |  |  |  | - |  |  |  | - |  |  |  | 238 |  |  |  | 238 |
Outstanding Warrants |  |  |  |  |  |  |  |  |  |  | 1,030 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Crude oil price risk derivatives |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 1,634 |  |  |  | - |  |  |  | 1,634 |
Total |  | $ | 930 |  |  | $ | 16 |  |  | $ | 1,030 |  |  | $ | 1,976 |  |  | $ | 25 |  |  | $ | 1,647 |  |  | $ | 238 |  |  | $ | 1,885 |
Executive retirement liability |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | 584 |  |  | $ | 584 |
| (1) | Due to a less active market for this investment, during the fourth quarter of 2015 the Company transferred this investment from Level 1 to Level 2 of the fair value hierarchy.
| (2) | Because the trading volume of Anfield shares have increased since we took possession, we determined a mark-to-market technique would be most appropriate to determine the fair value for Anfield shares. Previously, the Company used alternative methods to determine fair value upon receipt of the shares in September 2015, which requires classification under Level 3 of the fair value hierarchy. The Company has reclassified the Anfield shares under Level 1 of the fair value hierarchy.
The following table presents a reconciliation of changes in assets and liabilities measured at fair value on a recurring basis for the years ended December 31, 2016 and 2015:
|  | Assets |  |  |  |  |  | Liabilities |
|  | Marketable Securities |  |  | Crude Oil |  |  | Crude Oil |  |  | Executive |  |  |  |  |  |  |
|  | Sutter |  |  | Sutter |  |  | Anfield |  |  | Derivatives |  |  | Derivatives |  |  | Retirement |  |  | Warrants |  |  |  |
|  | (Level 1) |  |  | (Level 2) |  |  | (Level 1) |  |  | (Level 2) |  |  | (Level 2) |  |  | (Level 3) |  |  | (Level 3) |  |  | Net |
Fair value, December 31, 2014 |  |  | 25 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (1,309 | ) |  |  | - |  |  |  | (1,284 | )
Total net losses included in: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Other comprehensive loss |  |  | (12 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (12 | )
Fair value adjustments included in net loss: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net realized losses on oil price risk derivatives |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (35 | ) |  |  | (40 | ) |  |  | - |  |  |  | - |  |  |  | (75 | )
Net unrealized gains on oil price risk derivatives |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 1,634 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 1,634 |
Retirement expense |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (45 | ) |  |  | - |  |  |  | (45 | )
Transfer from Level 1 to Level 2 |  |  | (13 | ) |  |  | 13 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Acquisition of investment |  |  | - |  |  |  |  |  |  |  | 238 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 238 |
Discount negotiated on settlement |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 77 |  |  |  | - |  |  |  | 77 |
Offset of derivative assets and liabilities |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (40 | ) |  |  | 40 |  |  |  | - |  |  |  | - |  |  |  | - |
Cash settlements paid |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 75 |  |  |  | - |  |  |  | 694 |  |  |  | - |  |  |  | 769 |
Fair value, December 31, 2015 |  | $ | - |  |  | $ | 13 |  |  | $ | 238 |  |  | $ | 1,634 |  |  | $ | - |  |  | $ | (583 | ) |  |  |  |  |  | $ | 1,302 |
Total net losses included in: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Other comprehensive loss |  |  | - |  |  |  | 3 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  |  |  |  |  | 695 |
Fair value adjustments included in net loss: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net realized losses on oil price risk derivatives |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  |  |  |  |  | - |
Net unrealized gains on oil price risk derivatives |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  |  |  |  |  | - |
Net unrealized gain on warrant valuation |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | (210 | ) |  |  |  |
Net unrealized loss on Anfield Shares |  |  |  |  |  |  |  |  |  |  | (58 | ) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Retirement expense |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  |  |  |  |  | - |
Transfer from Level 1 to Level 2 |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Issuance of warrants |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 1,240 |  |  |  |  |
Acquisition of investment |  |  | - |  |  |  |  |  |  |  | 750 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  |  |  |  |  | - |
Discount negotiated on settlement |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  |  |  |  |  | - |
Offset of derivative assets and liabilities |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (194 | ) |  |  | - |  |  |  | - |  |  |  |  |  |  |  | (194 | )
Cash settlements paid |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (1,440 | ) |  |  | - |  |  |  | 583 |  |  |  |  |  |  |  | (857 | )
Fair value, December 31, 2016 |  | $ | - |  |  | $ | 16 |  |  | $ | 930 |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  |  | 1,030 |  |  | $ | 1,976 |

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=66048111&loc=d3e19207-110258 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 30 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14172-108612 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 28 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14064-108612 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=73719730&loc=d3e13537-108611 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 16 -URI http://asc.fasb.org/extlink&oid=73719730&loc=d3e13504-108611 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 10 -URI http://asc.fasb.org/extlink&oid=73719730&loc=d3e13433-108611 + Details
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