The Company reviews its oil and gas producing properties for impairment whenever events or changes in circumstances indicate that the carrying amount of such properties may not be recoverable. When it is determined that an oil and gas property’s estimated future net cash flows will not be sufficient to recover its carrying amount, an impairment charge must be recorded to reduce the carrying amount of the asset to its estimated fair value.

The Company determined no impairment charge was necessary in 2013.  In 2012, the Company recorded an impairment loss of $7.6 million in the United States to write down the value of its Hefley field in the Granite Wash formation to its estimated fair value. A combination of continued production declines from both producing wells and low natural gas prices had a negative impact on the fair value of the assets and an impairment charge was warranted.

The initial measurement of these assets at fair value is calculated using discounted cash flow techniques and based on estimates of future revenues and costs associated with the Granite Wash formation well. Significant Level 3 assumptions associated with the calculation of discounted cash flows used in the impairment analysis include the Company’s estimate of future crude oil and natural gas prices, production costs, development expenditures, and anticipated production of proved and probable reserves, appropriate risk-adjusted discount rates and other relevant data. For crude oil, estimates were based on NYMEX West Texas Intermediate prices, adjusted for quality, transportation fees, and a regional price differential. For natural gas, estimates were based on NYMEX Henry Hub prices, adjusted for energy content, transportation fees, and a regional price differential.