7.       CAPITALIZATION OF INTEREST

Under the terms of the IFC loan executed in 2014, the Company is required to pay a commitment fee on the undrawn component of the credit facility.

The Company capitalizes interest costs and commitment fees to oil and natural gas properties on expenditures made in connection with exploration and development projects that are not subject to current depletion. Interest and commitment fees are capitalized only for the period that activities are in progress to bring these projects to their intended use. For the three months and six months ended June 30, 2014, the Company incurred interest expense of $0.3 million and 0.5 million, respectively, in connection with our IFC loan. The entire expense was capitalized in the period.