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 is recorded to reduce the carrying amount of the asset to its estimated fair value.

Accordingly, impairment evaluation was performed using the year end 2014 independently prepared reserve report and forward price curves as of March 31, 2015. The Company performed a recoverability test as defined under ASC 932 and ASC 360, noting that the undiscounted cash flows related to the Southeast Etame and North Tchibala fields were less than the carrying value for these fields resulting in the Company recording an impairment loss of $5.4 million. The impairment is a result of recent decline in the forecasted oil prices as well as higher costs for planned development wells used in the impairment evaluation.     The $5.4 million write off in the Southeast Etame and North Tchibala field results in zero  recorded value remaining in those fields.  

The 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 Southeast Etame and North Tchibala fields. 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, and anticipated production of proved reserves, appropriate risk-adjusted discount rates and other relevant data. For crude oil, estimates were based on NYMEX Brent prices, adjusted for quality, transportation fees, and market differential.

In the three months ended March 31, 2014, the Company determined no impairment charge was necessary.