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OIL AND NATURAL GAS PROPERTIES | 3 Months Ended
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Mar. 31, 2021
OIL AND NATURAL GAS PROPERTIES |
OIL AND NATURAL GAS PROPERTIES | 5. OIL AND NATURAL GAS PROPERTIES The Company uses the full cost method of accounting for its investment in oil and natural gas properties. Under this method of accounting, all costs of acquisition, exploration and development of oil and natural gas reserves (including such costs as leasehold acquisition costs, geological expenditures, treating equipment and gathering support facilities costs, dry hole costs, tangible and intangible development costs and direct internal costs) are capitalized as the cost of oil and natural gas properties when incurred. To the extent capitalized costs of evaluated oil and natural gas properties, net of accumulated depletion, exceed the discounted future net revenues of proved oil and natural gas reserves, net of deferred taxes, such excess capitalized costs are charged to expense. Additionally, the Company assesses all properties classified as unevaluated property on a quarterly basis for possible impairment or reduction in value. The Company assesses properties on an individual basis or as a group, if properties are individually insignificant. The assessment includes consideration of the following factors, among others: intent to drill; remaining lease term; geological and geophysical evaluations; drilling results and activity; the assignment of proved reserves; and the economic viability of development if proved reserves are assigned. During any period in which these factors indicate impairment, the cumulative drilling costs incurred to date for such property and all or a portion of the associated leasehold costs are transferred to the full cost pool and are then subject to depletion and the full cost ceiling test limitation. At March 31, 2021, the ceiling test value of the Company’s reserves was calculated based on the first-day-of-the-month average for the 12-months ended March 31, 2021 of the West Texas Intermediate (WTI) crude oil spot price of $39.95 per barrel, adjusted by lease or field for quality, transportation fees, and regional price differentials, and the first-day-of-the-month average for the 12-months ended March 31, 2021 of the Henry Hub natural gas price of $2.16 per MMBtu, adjusted by lease or field for energy content, transportation fees, and regional price differentials. Using these prices, the Company’s net book value of oil and natural gas properties at March 31, 2021 did not exceed the ceiling amount. At March 31, 2020, the ceiling test value of the Company’s reserves was calculated based on the first‑day‑of‑the‑month average for the 12‑months ended March 31, 2020 of the WTI crude oil spot price of $55.96 per barrel, adjusted by lease or field for quality, transportation fees, and regional price differentials, and the first‑day‑of‑the‑month average for the 12‑months ended March 31, 2020 of the Henry Hub natural gas price of $2.30 per MMBtu, adjusted by lease or field for energy content, transportation fees, and regional price differentials. Using these prices, the Company’s net book value of oil and natural gas properties at March 31, 2020 did not exceed the ceiling amount. Changes in commodity prices, production rates, levels of reserves, future development costs, transfers of unevaluated properties to the full cost pool, capital spending, and other factors will determine the Company’s ceiling test calculation and impairment analyses in future periods.

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- Definition The entire disclosure for oil and gas enterprises that follow the full cost method of accounting for investments in oil and gas properties. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 932 -URI http://asc.fasb.org/topic&trid=2145477 + Details
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