4.  OIL AND NATURAL GAS PROPERTIES AND EQUIPMENT

We review our oil and natural 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 natural 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.

Declining forecasted oil prices and other factors caused us to perform impairment reviews of our proved properties in the first quarters of 2015 and 2016 for all fields in the Etame Marin block offshore Gabon and the Hefley field in North Texas. The impairment evaluations in each quarter used the most recently prepared independent reserve report adjusted as necessary for reserve revisions based on drilling and production results and for the forward price curves near each quarter end. The discounted cash flow measurement model relies primarily on Level 3 inputs. No impairment was required for the quarter ended March 31, 2016. As a result of a decline in forecasted oil prices and higher costs for planned development wells, for the quarter ended March 31, 2015, we recorded an aggregate impairment of $5.4 million to reduce the carrying value of the Southeast Etame and North Tchibala to zero, which was their fair value at March 31, 2015.

Beginning in the third quarter of 2014, the prices for oil and natural gas began a dramatic decline which continued through 2015 and into 2016.  Current prices are significantly less than they were in the several years prior to 2015. As this period of sustained reduced oil prices continues, further non-cash impairments of proved properties could be necessary in future periods, as a result of further declines in prices, higher than expected capital and production costs, lower production rates or other factors.

$5.4