OIL AND NATURAL GAS PROPERTIES

6 Months Ended

Jun. 30, 2020

OIL AND NATURAL GAS PROPERTIES

OIL AND NATURAL GAS PROPERTIES

NOTE 6—OIL AND NATURAL GAS PROPERTIES

Oil and natural gas properties consist of the following:

	June 30,		December 31,
	2020		2019
Oil and natural gas properties
Proved properties	$	906,256,358	$	758,313,233
Unevaluated properties		242,656,886		275,041,784
Less: accumulated depreciation, depletion and impairment		(490,530,741)		(328,913,425)
Total oil and natural gas properties	$	658,382,503	$	704,441,592

Costs associated with unevaluated properties are excluded from the full cost pool until a determination as to the existence of proved reserves is able to be made.

The Partnership assesses all items classified as unevaluated property on a periodic basis for possible impairment. The Partnership assesses properties on an individual basis or as a group if properties are individually insignificant. The assessment includes consideration of the following factors, among others: economic and market conditions; operators’ intent to drill; remaining lease term; geological and geophysical evaluations; operators’ drilling results and activity; the assignment of proved reserves; and the economic viability of operator development if proved reserves are assigned. During any period in which these factors indicate an impairment, all or a portion of the associated leasehold costs are transferred

to the full cost pool and are then subject to amortization and to the full cost ceiling test. The Partnership transferred $48.6 million to the full cost pool, which is included in the impairment charge for the six months ended June 30, 2020.

The Partnership recorded an impairment on its oil and natural gas properties of $65.5 million and $136.5 million during the three and six months ended June 30, 2020, respectively. The impairment recorded during the three and six months ended June 30, 2020 was due to the recent significant decline in oil and natural gas prices, as well as longer-term commodity price outlooks, related to reduced demand for oil and natural gas as a result of COVID-19, the announcement of price reductions and production increases in March 2020 by members of OPEC and other foreign, oil-exporting countries, and other supply factors. After evaluating these external factors, the Partnership determined that significant drilling uncertainty existed regarding its proved undeveloped (“PUD”) reserves that were included in its total estimated proved reserves as of December 31, 2019, as well as its unevaluated oil and natural gas properties. Specifically, with respect to the Partnership’s PUD reserves (which accounted for approximately 6.1% of total estimated proved reserves as of December 31, 2019), the Partnership determined that it did not have reasonable certainty as to the timing of the development of the PUD reserves and, therefore, recorded an impairment on such properties in the first quarter of 2020. The Partnership similarly recorded an impairment on the value of its unevaluated oil and natural gas properties in the first quarter of 2020, which primarily were acquired in various acquisitions since its initial public offering. There were no additional impairments to unevaluated properties in the second quarter of 2020. The Partnership does not intend to book PUD reserves going forward.

The Partnership recorded an impairment on its oil and natural gas properties of $28.1 million and $30.9 million during the three and six months ended June 30, 2019, respectively, primarily due to a decline in the 12-month average price of oil and natural gas.