7. OIL AND NATURAL GAS PROPERTIES

Gathering and transportation assets consist of the following (in thousands):


	September 30,		December 31,
	2016		2015
Gathering and transportation assets
Catarina midstream assets	$	148,070	$	147,479
Less: Accumulated depreciation, depletion, amortization		(6,571)		(1,402)
Total gathering and transportation assets	$	141,499	$	146,077

Oil and Natural Gas Properties We follow the successful efforts method of accounting for our oil and natural gas production activities. Leasehold acquisition costs, property acquisition and the costs of development of proved areas are capitalized. If proved reserves are found on an undeveloped property, leasehold cost is transferred to proved properties. Under this method of accounting, costs relating to the development of proved areas are capitalized when incurred.

Oil and natural gas properties consisted of the following (in thousands):



	September 30,		December 31,
	2016		2015
Oil and natural gas properties and related equipment (successful efforts method)
Property costs
Proved property	$	731,617	$	731,548
Unproved property		42		39
Land		501		501
Total property costs		732,160		732,088
Materials and supplies		1,056		1,056
Total		733,216		733,144
Less: Accumulated depreciation, depletion, amortization and impairments		(666,123)		(652,167)
Oil and natural gas properties and equipment, net	$	67,093	$	80,977

Depreciation, Depletion and Amortization. Depreciation and depletion of producing oil and natural gas properties is recorded at the field level, based on the units-of-production method. Unit rates are computed for unamortized drilling and development costs using proved developed reserves and for unamortized leasehold costs using all proved reserves. Acquisition costs of proved properties are amortized on the basis of all proved reserves, developed and undeveloped, and capitalized development costs (including wells and related equipment and facilities) are amortized on the basis of proved developed reserves.

All other properties, including the gathering and transportation assets, are stated at historical acquisition cost, net of any impairments, and are depreciated using the straight-line method over the useful lives of the assets, which range from 3 to 15 years for furniture and equipment, and up to 36 years for gathering facilities.

Depreciation, depletion, amortization and impairments consisted of the following (in thousands):


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2016		2015		2016		2015

DD&A of oil and natural gas-related assets	$	2,348	$	2,851	$	5,310	$	9,050
DD&A of gathering and transportation related assets		1,731		—		5,169		—
Total DD&A		4,079		2,851		10,479		9,050
Asset impairments		—		937		1,309		84,664
Total	$	4,079	$	3,788	$	11,788	$	93,714

Impairment of Oil and Natural Gas Properties and Other Non-Current Assets. Oil and natural gas properties are reviewed for impairment on a field-by-field basis when facts and circumstances indicate that their carrying value may not be recoverable. We assess impairment of capitalized costs of proved oil and natural gas properties by comparing net capitalized costs to estimated undiscounted future net cash flows using expected prices. If net capitalized costs exceed estimated undiscounted future net cash flows, the measurement of impairment is based on estimated fair value, which would consider estimated future discounted cash flows. The cash flow estimates are based upon third-party reserve reports using future expected oil and natural gas prices adjusted for basis differentials. Other significant inputs, besides reserves, used to determine the fair values of proved properties include estimates of: (i) future operating and development costs; (ii) future commodity prices; and (iii) a market-based weighted average cost of capital rate. These inputs require significant judgments and estimates by the Partnership’s management at the time of the valuation and are the most sensitive and subject to change. Cash flow estimates for impairment testing exclude derivative instruments.

For the three months ended September 30, 2016, we did not record any impairment charges. For the nine months ended September 30, 2016, we recorded non-cash charges of $1.3 million to impair our producing oil and natural gas properties in Texas and Louisiana acquired prior to the Eagle Ford Acquisition. For the three and nine months ended September 30, 2015, we recorded non-cash charges of $0.9 million and $84.7 million, respectively, to impair the value of our Cherokee Basin properties, Woodford Shale properties and our Texas and Louisiana properties acquired prior to the Eagle Ford Acquisition. The carrying values of the proved properties have a fair value of $77.2 million as of September 30, 2016, estimated using inputs characteristic of a Level 3 fair value measurement.

Asset Retirement Obligation. As described in Note 8, estimated asset retirement costs are recognized when the asset is acquired or placed in service, and are amortized over proved developed reserves using the units-of-production method. Asset retirement costs are estimated by our engineers using existing regulatory requirements and anticipated future inflation rates.

Exploration and Dry Hole Costs. Exploration and dry hole costs represent abandonments of drilling locations, dry hole costs, delay rentals, geological and geophysical costs and the impairment, amortization and abandonment associated with leases on our unproved properties. All such costs on oil and natural gas properties relating to unsuccessful exploratory wells are charged to expense as incurred. We recorded no exploration or dry hole costs for the nine months ended September 30, 2016 or 2015.