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Fair Value Measurements | 12 Months Ended
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Dec. 31, 2017
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 adequate credit quality and has the financial resources and willingness to meet its potential repayment obligations associated with the derivative transactions. 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 contain a dilutive issuance and other liability provisions which cause the warrants to be accounted for as a liability. Such warrant instruments are initially recorded and valued as a level 3 liability and are accounted for at fair value with changes in fair value reported in earnings. The Company estimated the value of the warrants on December 31, 2016 using the Monte Carlo model with the following assumptions: a term expiring June 21, 2022, exercise price of $2.05, volatility rate of 90%, and a risk-free interest rate of 2.01%. The Company remeasured the warrants as of December 31, 2017, using the same Monte Carlo model, using the following assumptions: a term expiring June 21, 2022, exercise price of $2.05, stock price of $1.50, average volatility rate of 90%, and a risk-free interest rate of 2.15%. As of December 31, 2017, the fair value of the warrants was $1,200,000, or $1.20 per warrant, and was recorded as a liability on the accompanying consolidated balance sheets. An increase in any of the variables would cause an increase in the fair value of the warrants. Likewise, a decrease in any 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. 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 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, 2017 and 2016 are as follows:
|  | December 31, 2017 |  |  | December 31, 2016 |
|  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Total |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Total |
Marketable equity securitites: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Sutter Gold Mining Company |  | $ | - |  |  | $ | 8 |  |  | $ | - |  |  | $ | 8 |  |  | $ | - |  |  | $ | 16 |  |  | $ | - |  |  | $ | 16 |
Anfield Resources, Inc. |  |  | 868 |  |  |  | - |  |  |  | - |  |  |  | 868 |  |  |  | 930 |  |  |  | - |  |  |  | - |  |  |  | 930 |
Total |  | $ | 868 |  |  | $ | 8 |  |  | $ | - |  |  | $ | 876 |  |  | $ | 930 |  |  | $ | 16 |  |  | $ | - |  |  | $ | 946 |
Outstanding warrant liability |  |  | - |  |  |  | - |  |  |  | 1,200 |  |  |  | 1,200 |  |  |  | - |  |  |  | - |  |  |  | 1,030 |  |  |  | 1,030 |
Crude oil price risk derivatives |  |  | - |  |  |  | 161 |  |  |  | - |  |  |  | 161 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Total |  | $ | - |  |  | $ | 161 |  |  | $ | 1,200 |  |  | $ | 1,361 |  |  | $ | - |  |  | $ | - |  |  | $ | 1,030 |  |  | $ | 1,030 |
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, 2017 and 2016:
|  | Assets |  |  | Liabilities |
|  | Marketable Securities |  |  | Crude Oil |  |  | Crude Oil |  |  | Executive |  |  |  |  |  |  |
|  | Sutter |  |  | Anfield |  |  | Derivatives |  |  | Derivatives |  |  | Retirement |  |  | Warrants |  |  |  |
|  | (Level 2) |  |  | (Level 1) |  |  | (Level 2) |  |  | (Level 2) |  |  | (Level 3) |  |  | (Level 3) |  |  | Net |
Fair value, December 31, 2015 |  |  | 13 |  |  |  | 238 |  |  |  | 1,634 |  |  |  | - |  |  |  | (583 | ) |  |  | - |  |  |  | 1,302 |
Acquisition of investment |  |  | - |  |  |  | 750 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 750 |
Issuance of warrants |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 1,240 |  |  |  | 1,240 |
Other comprehensive loss |  |  | 3 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 3 |
Fair value adjustments included in net loss: |  |  | - |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net unrealized gain on warrant valuation |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (210 | ) |  |  | (210 | )
Net unrealized loss on Anfield Shares |  |  | - |  |  |  | (58 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (58 | )
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 |
Total net losses included in: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Acquisition of investment |  |  | - |  |  |  | 777 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 777 |
Other comprehensive loss |  |  | (8 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (8 | )
Fair value adjustments included in net loss: |  |  |  |  |  |  |  |  |  |  |  |  |  |  | - |  |  |  |  |  |  |  |  |  |  |  |  |
Net unrealized loss on oil price risk derivatives |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (26 | ) |  |  | - |  |  |  | - |  |  |  | (26 | )
Net unrealized loss on warrant valuation |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 170 |  |  |  | 170 |
Net unrealized loss on Anfield Shares |  |  | - |  |  |  | (839 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (839 | )
Cash settlements paid |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (135 | ) |  |  | - |  |  |  | - |  |  |  | (135 | )
|  |  |  |  |  |  |  |  |  |  |  |  |  |  | - |  |  |  |  |  |  |  |  |  |  |  |  |
Fair value, December 31, 2017 |  | $ | 8 |  |  | $ | 868 |  |  | $ | - |  |  |  | (161 | ) |  | $ | - |  |  | $ | 1,200 |  |  | $ | 1,915 |

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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 -URI http://asc.fasb.org/topic&trid=2155941 + Details
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