OIL AND NATURAL GAS INTERESTS

3 Months Ended

Mar. 31, 2020

Oil and natural gas interests include the following:



	March 31,			December 31,
	2020			2019

	(in thousands)
Oil and natural gas interests:
Subject to depletion	$	1,345,093		$	1,316,692
Not subject to depletion	1,587,992			1,551,767
Gross oil and natural gas interests	2,933,085			2,868,459
Accumulated depletion and impairment	(351,116		)	(326,474		)
Oil and natural gas interests, net	2,581,969			2,541,985
Land	5,688			5,688
Property, net of accumulated depletion and impairment	$	2,587,657		$	2,547,673

Balance of costs not subject to depletion:
Incurred in 2020	$	54,062
Incurred in 2019	827,680
Incurred in 2018	459,094
Incurred in 2017	247,156
Total not subject to depletion	$	1,587,992

Costs associated with unevaluated interests are excluded from the full cost pool until a determination as to the existence of proved reserves can be made. The inclusion of the Partnership’s unevaluated costs into the amortization base is expected to be completed within five years.

Under the full cost method of accounting, the Partnership is required to perform a ceiling test each quarter. The test determines a limit, or ceiling, on the book value of the proved oil and gas interests. Net capitalized costs are limited to the lower of unamortized cost or the cost center ceiling. The cost center ceiling is defined as the sum of (a) estimated future net revenue including estimated expenditures (based on current costs) to be incurred in developing and producing the proved reserves, discounted at 10% per annum, from proved reserves, based on the trailing 12-month unweighted average of the first-day-of-the-month price, adjusted for any contract provisions or financial derivatives, if any, that hedge the Partnership’s oil and natural gas revenue, (b) the cost of interests not being amortized, if any, and (c) the lower of cost or market value of unproved interests included in the cost being amortized. If the net book value exceeds the ceiling, an impairment or non-cash write down is required.

After performing the ceiling test for the quarter ended March 31, 2020, the Partnership was not required to record an impairment. If the trailing 12-month commodity prices continue to fall as compared to the commodity prices used in prior quarters, the Partnership will have material write downs in subsequent quarters.