6. Property and Equipment

	March 31, 2015			December 31, 2014
	(in thousands)
Oil and gas properties, on the basis of full-cost accounting:
Proved properties	$	3,491,783		$	3,398,146
Unevaluated properties	41,193			44,535
Other property and equipment	13,845			13,454
Less accumulated depreciation, depletion, amortization and impairment	(1,566,043		)	(1,333,019		)
Net property and equipment	$	1,980,778		$	2,123,116

Oil and Gas Properties

The Company capitalizes internal costs directly related to exploration and development activities to oil and gas properties. During the three months ended March 31, 2015 and 2014, the Company capitalized the following amounts (in thousands):

	Three Months Ended March 31,
	2015		2014
Internal costs capitalized to oil and gas properties (1)	$	2,302	$	3,124

(1)

Inclusive of $0.5 million of qualifying share-based compensation expense for the three months ended March 31, 2015 and 2014.

The Company accounts for its oil and gas properties under the full cost method. Under the full cost method, proceeds from the sale or disposition of oil and gas properties are accounted for as a reduction to capitalized costs unless a significant portion of the Company’s reserve quantities are sold such that it results in a significant alteration of the relationship between capitalized costs and remaining proved reserves, in which case a gain or loss is generally recognized in income.

The Company performs a full-cost ceiling test on a quarterly basis. The test establishes a limit (ceiling) on the book value of oil and gas properties. The capitalized costs of oil and gas properties, net of accumulated depreciation, depletion and amortization (DD&A) and the related deferred income taxes, may not exceed this “ceiling.” The ceiling limitation is equal to the sum of: (i) the present value of estimated future net revenues from the projected production of proved oil and gas reserves, excluding future cash outflows associated with settling asset retirement obligations accrued on the balance sheet, calculated using the average oil and natural gas sales price received by the Company as of the first trading day of each month over the preceding twelve months (such prices are held constant throughout the life of the properties) and a discount factor of 10%; (ii) the cost of unproved and unevaluated properties excluded from the costs being amortized; (iii) the lower of cost or estimated fair value of unproved properties included in the costs being amortized; and (iv) related income tax effects. If capitalized costs exceed this ceiling, the excess is charged to expense in the accompanying consolidated statements of operations.

At March 31, 2015 and 2014, capitalized costs exceeded the ceiling and the Company recorded an impairment of oil and gas properties of $174.7 million and $86.5 million, respectively. The impairment at March 31, 2015 was primarily due to continued low commodity prices, which resulted in a reduction of the discounted present value of the Company’s proved oil and natural gas reserves.

Depreciation, depletion and amortization is calculated using the units-of-production method based upon estimates of proved reserve quantities, the Company’s costs incurred for proved developed properties and costs expected to be incurred to develop its proved undeveloped reserves. The following table presents depletion expense related to oil and gas properties for the three months ended March 31, 2015 and 2014, respectively:

	Three Months Ended March 31,
	2015		2014		2015		2014
	(in thousands)				(per Boe)
Depletion expense	$	57,605	$	66,204	$	18.73	$	25.37
Depreciation on other property	823		697		0.27		0.26
Depreciation, depletion, and amortization	$	58,428	$	66,901	$	19.00	$	25.63

Oil and gas unevaluated properties and properties under development include costs that are not being depleted or amortized. These costs represent investments in unproved properties. The Company excludes these costs until proved reserves are found, until it is determined that the costs are impaired or until major development projects are placed in service, at which time the costs are moved into oil and natural gas properties subject to amortization. All unproved property costs are reviewed at least quarterly to determine if impairment has occurred. Unevaluated property was $41.2 million and $44.5 million at March 31, 2015 and December 31, 2014, respectively.

Sale of Dequincy Assets

On April 21, 2015, the Company closed on the sale of its ownership interest in developed and undeveloped acreage in the Dequincy area located in Beauregard and Calcasieu Parishes, Louisiana for $44 million to Pintail Oil and Gas LLC. The net proceeds of approximately $42 million, which was net of customary closing adjustments, will be reflected as a reduction of oil and natural gas properties, with no gain or loss recognized. The proceeds from the sale will be used to pay down a portion of the outstanding borrowings under the Company’s revolving credit facility and for general corporate purposes.