FAIR VALUE MEASUREMENTS

12 Months Ended

Dec. 31, 2019

Recurring measurements

We historically utilized the modified Black-Scholes and the Turnbull Wakeman option pricing models to estimate the fair values of oil and gas derivatives. Inputs to these models included observable inputs from the NYMEX for futures contracts, and inputs derived from NYMEX observable inputs, such as implied volatility of oil and gas prices. We have classified the inputs used to determine fair values of all our oil, gas and natural gas liquids derivative contracts as Level 2. See Note 13 - Derivatives for further information.

Non-recurring measurements

We estimated the fair value of Alta Mesa’s 2024 Notes to be $45.3 million at December 31, 2019 ($312.5 million at December 31, 2018), based on their most recent trading values at or near each reporting date, which is a Level 1 determination.

At December 31, 2019, our oil, gas and midstream properties were evaluated for impairment based on the winning bid prices in a January 2020 auction of our assets conducted as part of a Bankruptcy Court approved sales process. These bid prices are considered a Level 1 input. Prior to December 31, 2019, our oil, gas, and midstream properties, as well as our goodwill and intangible assets in our Midstream segment were subject to impairment testing and potential impairment based largely on future estimated cash flows determined using Level 3 inputs.



	December 31, 2019						December 31, 2018
(in thousands)	Carrying Value Before Assessment		Estimated Fair Value		Impairment		Carrying Value Before Assessment		Estimated Fair Value		Impairment
Unproved oil and gas properties	$	31,023	$	—	$	31,023	$	816,282	$	74,217	$	742,065
Proved oil and gas properties	700,182		215,352		484,830		1,895,670		604,023		1,291,647
Operating lease right-of-use assets	13,514		—		13,514		—		—		—
Other long-term assets⁽¹⁾	51,518		24,189		27,329		—		—		—
Equity method investment	—		—		—		17,063		1,100		15,963
Midstream property and equipment⁽¹⁾	432,415		83,818		348,597		474,529		406,122		68,407
Intangible assets	—		—		—		394,999		—		394,999
Goodwill	—		—		—		691,970		—		691,970
Total	$	1,228,652	$	323,359	$	905,293	$	4,290,513	$	1,085,462	$	3,205,051

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(1) Amounts reflect only those assets that were impaired.

We estimate the fair value of additions to asset retirement obligations associated with new or acquired properties. Such estimations of fair value are based on present value techniques that utilize company-specific information for inputs such as the cost and timing of plugging and abandonment of wells and facilities. These inputs are classified as Level 3.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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