5. Property and Equipment

	March 31, 2016			December 31, 2015
	(in thousands)
Oil and gas properties, on the basis of full-cost accounting:
Proved properties	$	3,723,879		$	3,666,403
Unevaluated properties	—			—
Other property and equipment	13,488			14,798
Less accumulated depreciation, depletion, amortization and impairment	(3,308,871		)	(3,157,332		)

Net property and equipment	$	428,496		$	523,869

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, 2016 and 2015, the Company capitalized the following amounts (in thousands):

	Three Months Ended March 31,
	2016		2015
Internal costs capitalized to oil and gas properties (1)	$	1,270	$	2,302

(1)

Inclusive of $0.2 million and $0.5 million of qualifying share-based compensation expense for the three months ended March 31, 2016 and 2015, respectively.

The Company accounts for its oil and gas properties under the full cost method. Under the full cost method, proceeds realized 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 the Company’s 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.

For the three months ended March 31, 2016 and 2015, capitalized costs exceeded the ceiling and the Company recorded an impairment of oil and gas properties of $127.7 million and $174.7 million, respectively. These impairments were primarily the result of 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 (“UOP”). The UOP calculation multiplies the percentage of estimated proved reserves produced by the cost of these reserves. The result is to recognize the expense at the same pace that the reservoirs are estimated to be depleting. The amortization base in the UOP calculation includes the sum of proved property costs net of accumulated depreciation, depletion, amortization and impairment, estimated future development costs (future costs to access and develop proved reserves) and asset retirement costs that are not already included in oil and gas property, less related salvage value. The following table presents depletion expense related to oil and gas properties for the three months ended March 31, 2016 and 2015, respectively:

	Three Months Ended March 31,
	2016		2015		2016		2015
	(in thousands)				(per Boe)
Depletion expense	$	23,742	$	57,605	$	8.15	$	18.73
Depreciation on other property and equipment	1,093		823		0.37		0.27

Depreciation, depletion, and amortization	$	24,835	$	58,428	$	8.52	$	19.00

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. During 2015, the Company transferred the remaining unevaluated property balance of $56.6 million to the full cost pool as a result of current pricing, its anticipated future drilling plans and uncertainty regarding its ability to finance its future exploration activities. As such, the Company had no balances related to unevaluated properties at either March 31, 2016 or December 31, 2015.

Other Property and Equipment

Other property and equipment consists of vehicles, furniture and fixtures, and computer hardware and software and are carried at cost. Depreciation is calculated principally using the straight-line method over the estimated useful lives of the assets, which range from five to seven years. Maintenance and repairs are charged to expenses as incurred, while renewals and betterments are capitalized.