IMPAIRMENT OF ASSETS

12 Months Ended

Dec. 31, 2019

Other Income and Expenses [Abstract]



	Successor				Predecessor
(in thousands)	Year Ended December 31, 2019		February 9, 2018 Through December 31, 2018		January 1, 2018 Through February 8, 2018
Upstream
Impairment of unproved properties	$	31,023	$	742,065	$	—
Impairment of proved properties	484,830		1,291,647		—
Impairment of operating lease right-of-use assets	13,245		—		—
Impairment of other long-term assets	27,329		—		—
Total Upstream impairment of assets	556,427		2,033,712		—
Midstream
Impairment of Cimarron investment	—		15,963		—
Impairment of property and equipment	348,597		68,407		—
Impairment of operating lease right-of-use assets	269		—		—
Impairment of intangible assets	—		394,999		—
Impairment of goodwill	—		691,970		—
Total Midstream impairment of assets	348,866		1,171,339		—

Total impairment of assets	$	905,293	$	3,205,051	$	—

Impairment of Proved and Unproved Properties

The Initial Debtors filed for bankruptcy protection in September 2019. The sales price per the AMH PSA is $232.0 million (with a January 1, 2020 effective date) for substantially all of our oil and gas properties and certain other upstream property and equipment, resulting in total impairment expense of $515.9 million for our proved and unproved oil and gas properties and $13.1 million for certain other upstream property and equipment during 2019.

During the late fourth quarter of 2018, we experienced a combination of depressed prevailing oil and gas prices, changes to assumed spacing in conjunction with evolving views on the viability of multiple benches and reduced individual well expectations. We determined these factors indicated possible impairment of our assets. Following our analysis of impairment, we recognized impairment charges of $2.0 billion in 2018 to our proved and unproved oil and gas properties using an income approach supplemented by a market approach for our unproved properties.

Impairment of Operating Lease Right-of-Use Assets

During the second quarter of 2019, we consolidated employees in existing leased office space in Houston, Texas and Oklahoma City, Oklahoma. We sought to sublease our unused office space resulting from the consolidation but have since suspended those efforts in connection with our bankruptcy filing. Additionally, as a result of the expected Sale Transactions, we concluded that all remaining operating lease right-of-use assets were also not recoverable based on expected rejection of those leases in bankruptcy. As a result, we recognized charges of $13.2 million and $0.3 million, respectively, to fully impair all remaining Upstream and Midstream operating lease right-of-use assets at December 31, 2019. This impairment had no impact on our lease liability.

Impairment of Other Long-Term Assets

In addition to the impairment of certain other upstream property and equipment described above, we also recognized impairment expense of $14.2 million associated with a long-term asset relating to a prepayment of certain transportation fees under a long-term customer contract. As part of our bankruptcy proceedings, we expect this contract will be rejected and have determined that recovery of this prepayment is unlikely.

Impairment of equity method investment

As the late-2018 outlook for Alta Mesa volumes and third-party volume opportunities in the area were significantly lower than initially projected, we suspended future contributions to Cimarron and agreed with our partner to abandon the project. We conducted an impairment analysis resulting in recognition of an impairment charge of $16.0 million to reduce the carrying value of our investment in Cimarron to its estimated fair value at December 31, 2018. In November 2019, we acquired the remaining 50% interest in Cimarron and consolidated this entity thereafter.

Impairment of property and equipment and intangible assets

The sales price per the KFM PSA is $88.0 million (with a January 1, 2020 effective date) for substantially all of our midstream property and equipment, resulting in total impairment expense of $348.6 million during 2019.

In the fourth quarter of 2018, we performed a quantitative assessment of our Midstream property and equipment and intangible assets, which included the use of an income approach which determined that the future undiscounted cash flows associated with our Midstream long-lived assets and intangible assets were below the combined carrying value of those assets. The cash flows used in the income approach were largely determined based on expected future gathering volumes which are dedicated to our gathering and processing facilities and are considered Level 3 inputs. We also considered the overall utilization of the processing plant and applied downward adjustments to the cost approach to account for decreased plant utilization. Based on an estimate of fair value using a discounted cash flow income approach, we determined that the carrying value of our Midstream property and equipment was in excess of its fair value and that the intangible assets were fully impaired at December 31, 2018. Accordingly, we recognized impairment charges in 2018 of $68.4 million to reduce the carrying value of our Midstream property and equipment to fair value and $395.0 million to reduce the remaining carrying value of our intangible assets to zero.

Impairment of goodwill

We performed a quantitative assessment to determine if the goodwill attributable to the Midstream segment was impaired as of December 31, 2018. Our assessment included the use of (i) an income approach to calculate the present value of estimated future discounted cash flows and (ii) a market approach to assess the value of the Midstream segment based on market participant multiples applied to the segment’s 2019 estimated cash generation. The cash flows used in the income approach were largely determined based on expected future production volumes of our Upstream segment, much of which is dedicated to the Midstream segment’s gathering and processing facilities. The income approach also used a market participant-based discount rate. Each of our assumptions regarding earnings, cash flows and discount rates were based mainly on Level 3 unobservable inputs. The results from the income approach and the market approach were appropriately weighted to recognize an impairment charge to eliminate the remaining carrying value of our goodwill.