8. OIL AND NATURAL GAS PROPERTIES AND RELATED EQUIPMENT

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


	March 31,		December 31,
	2018		2017
Gathering and transportation assets
Midstream assets	$	185,407	$	184,969
Less: Accumulated depreciation and amortization		(28,770)		(26,870)
Total gathering and transportation assets	$	156,637	$	158,099

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



	March 31,		December 31,
	2018		2017
Oil and natural gas properties and related equipment
Proved property	$	171,041	$	170,750
Less: Accumulated depreciation, depletion, amortization and impairments		(117,055)		(115,704)
Oil and natural gas properties and equipment, net	$	53,986	$	55,046

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

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.

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
	March 31,
	2018		2017
Depreciation, depletion and amortization of oil and natural gas-related assets	$	1,363	$	3,234
Depreciation and amortization of gathering and transportation related assets		1,900		5,535
Amortization of intangible assets		3,365		3,412
Total Depreciation, depletion and amortization		6,628		12,181
Asset impairments		—		4,688
Total	$	6,628	$	16,869

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 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.

The recoverability of gathering and transportation assets is evaluated when facts or circumstances indicate that their carrying value may not be recoverable. Asset recoverability is measured by comparing the carrying value of the asset or asset group with its expected future pre-tax undiscounted cash flows. These cash flow estimates require us to make projections and assumptions for many years into the future for pricing, demand, competition, operating cost and other factors. If the carrying amount exceeds the expected future undiscounted cash flows, we recognize an impairment equal to the excess of net book value over fair value. The determination of the fair value using present value techniques requires us to make projections and assumptions regarding the probability of a range of outcomes and the rates of interest used in the present value calculations. Any changes we make to these projections and assumptions could result in significant revisions to our evaluation of recoverability of our gathering and transportation assets and the recognition of additional impairments. Upon disposition or retirement of gathering and transportation assets, any gain or loss is recorded to operations.

For the three months ended March 31, 2018, we recorded no impairment charges. For the three months ended March 31, 2017, we recorded non-cash charges of $4.7 million to impair certain of our producing oil and natural gas properties in Texas acquired as part of the acquisition in November 2016, where we completed the acquisition from SN Cotulla Assets, LLC and SN Palmetto, LLC, each a wholly-owned subsidiary of Sanchez Energy, of working interests in 23 producing Eagle Ford Shale wellbores located in Dimmit and Zavala counties in South Texas together with escalating working interests in an additional 11 producing wellbores located in the Palmetto Field in Gonzales County, Texas (together, the “Production Acquisition”).

Asset Retirement Costs. As described in Note 9 “Asset Retirement Obligation”, estimated asset retirement costs (“ARC”) are recognized when the asset is acquired or placed in service and are amortized over proved developed reserves using the units-of-production method for production assets and the straight-line method for midstream assets. Asset retirement costs are estimated by our engineers using existing regulatory requirements and anticipated future inflation rates.