6. Property and Equipment

Property and equipment consisted of the following as of the dates presented:


	March 31, 2019		December 31, 2018
	(in thousands)
Oil and gas properties, on the basis of full-cost accounting:
Proved properties	$	818,013	$	809,272
Unproved properties not being amortized		1,869		4,050
Other property and equipment		6,340		6,345
Less accumulated depreciation, depletion, amortization and impairment		(287,544)		(266,198)
Net property and equipment	$	538,678	$	553,469

Oil and Gas Properties

Historically, the Company has capitalized internal costs directly related to exploration and development activities to oil and gas properties. During the three months ended March 31, 2019, the Company did not have significant exploration and development activities and no internal costs were capitalized. During the three months ended March 31, 2019 and 2018, the Company capitalized the following (in thousands):


	2019		2018
Internal costs capitalized to oil and gas properties (1)	$	—	$	895

(1)

Inclusive of $0.2 million of qualifying share-based compensation expense for the three months ended March 31, 2018.

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. During the three months ended March 31, 2018, the Company signed a purchase and sale agreement for its Anadarko Basin assets for $58.0 million before customary closing or post-closing adjustments. The sale of the Anadarko Basin assets closed on May 31, 2018, and did not result in a significant alteration of the full cost pool and therefore, no gain or loss was recognized when the transaction closed.

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, amortization and impairment (“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 held constant throughout the life of the properties) and a discount factor of 10%; (ii) the cost of unproved 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 unaudited interim condensed consolidated statements of operations.

For the three months ended March 31, 2019, capitalized costs exceeded the ceiling and the Company recorded an impairment of oil and gas properties of $9.7 million. This impairment was primarily the result of low commodity prices, which resulted in a reduction of the discounted present value of the Company’s proved oil and natural gas reserves. No impairment of oil and gas properties was recorded during the three months ended March 31, 2018.

Depreciation, depletion and amortization is calculated using the Units of Production Method (“UOP”). The UOP calculation multiplies the percentage of total estimated proved reserves produced by the cost of those reserves. The result is to recognize 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 periods presented:


	Three Months Ended				Three Months Ended
	March 31,				March 31,
	2019		2018		2019		2018
	(in thousands)				(per Boe)
Depletion expense	$	11,680	$	14,623	$	9.81	$	8.45
Depreciation on other property and equipment		114		590		0.10		0.34
Depreciation, depletion, and amortization	$	11,794	$	15,213	$	9.91	$	8.79

Oil and gas unproved properties include costs that are not being depleted or amortized. 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 annually to determine if impairment has occurred. In addition, impairment assessments are made for interim reporting periods if facts and circumstances exist that suggest impairment may have occurred. During any period in which impairment is indicated, the accumulated costs associated with the impaired property are transferred to proved properties and become part of our depletion base and subject to the full cost ceiling limitation. No impairment of unproved properties was recorded during the three months ended March 31, 2019 or 2018. Unproved property was $1.9 million and $4.1 million at March 31, 2019 and December 31, 2018, respectively.

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 two to ten years. Maintenance and repairs are charged to expense as incurred, while renewals and betterments are capitalized.