PROPERTY AND EQUIPMENT
|3 Months Ended|
Mar. 31, 2020
|Property, Plant and Equipment [Abstract]|
|PROPERTY AND EQUIPMENT||
PROPERTY AND EQUIPMENT
The major categories of property and equipment and related accumulated depletion, depreciation, amortization ("DD&A") and impairment as of March 31, 2020 and December 31, 2019 are as follows:
Under the full cost method of accounting, the Company is required to perform a ceiling test each quarter. The test determines a limit, or ceiling, on the book value of the Company's oil and natural gas properties. At March 31, 2020, the net book value of the Company's oil and gas properties, less related deferred income taxes, was above the calculated ceiling as a result of reduced commodity prices for the period leading up to March 31, 2020. As a result, the Company was required to record an impairment of its oil and natural gas properties in the amount of $553.3 million for the three months ended March 31, 2020. No impairment was required for oil and natural gas properties for the three months ended March 31, 2019.
Based on prices for the last nine months and the short-term pricing outlook for the second quarter of 2020, the Company expects to recognize additional full cost impairments in the second quarter of 2020. The amount of any future impairments is difficult to predict as it depends on changes in commodity prices, production rates, proved reserves, evaluation of costs excluded from amortization, future development costs and production costs. Any future full cost impairments are not expected to have any impact to the Company's future cash flows or liquidity.
General and administrative costs capitalized to the full cost pool represent management’s estimate of costs incurred directly related to exploration and development activities such as geological and other costs associated with overseeing the exploration and development activities. All general and administrative costs not directly associated with exploration and development activities were charged to expense as they were incurred. Capitalized general and administrative costs were approximately $5.4 million and $7.7 million for the three months ended March 31, 2020 and 2019, respectively.
The average depletion rate per Mcfe, which is a function of capitalized costs, future development costs and the related underlying reserves in the periods presented, was $0.79 and $1.02 per Mcfe for the three months ended March 31, 2020 and 2019, respectively.
The following table summarizes the Company’s unevaluated properties excluded from amortization by area at March 31, 2020:
At December 31, 2019, approximately $1.7 billion of unevaluated properties were not subject to amortization.
The Company evaluates the costs excluded from its amortization calculation at least annually. Individually insignificant unevaluated properties are grouped for evaluation and periodically transferred to evaluated properties over a timeframe consistent with their expected development schedule.
Asset Retirement Obligation
A reconciliation of the Company’s asset retirement obligation for the three months ended March 31, 2020 and 2019 is as follows:
The entire disclosure for long-lived, physical assets used in the normal conduct of business and not intended for resale. Includes, but is not limited to, accounting policies and methodology, roll forwards, depreciation, depletion and amortization expense, including composite depreciation, accumulated depreciation, depletion and amortization expense, useful lives and method used, income statement disclosures, assets held for sale and public utility disclosures.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef