Investment in Laramie Energy, LLC

9 Months Ended

Sep. 30, 2017

Equity Method Investments and Joint Ventures [Abstract]

We have a 42.3% ownership interest in Laramie Energy. Laramie Energy is focused on producing natural gas in Garfield, Mesa, and Rio Blanco Counties, Colorado. We acquired our equity interest in Laramie Energy as a result of (1) the contribution of certain natural gas and oil interests to Laramie Energy in conjunction with our corporate reorganization in August 2012 and (2) cash contributions of $27.5 million in 2015 and $55.0 million in 2016.

Laramie Energy has a $400 million revolving credit facility with a borrowing base currently set at $210 million that is secured by a lien on its natural gas and crude oil properties and related assets. As of September 30, 2017, the balance outstanding on the revolving credit facility was approximately $149 million. We are limited recourse guarantors of Laramie Energy’s credit facility, with such recourse limited to the pledge of our equity interest of our wholly owned subsidiary, Par Piceance Energy Equity, LLC. Under the terms of its credit facility, Laramie Energy is generally prohibited from making future cash distributions to its owners, including us.

The change in our equity investment in Laramie Energy is as follows (in thousands):



	Nine Months Ended September 30, 2017
Beginning balance	$	108,823
Equity earnings from Laramie Energy	7,657
Accretion of basis difference	3,994
Ending balance	$	120,474

Summarized financial information for Laramie Energy is as follows (in thousands):



	September 30, 2017		December 31, 2016
Current assets	$	12,149	$	12,199
Non-current assets	690,600		655,022
Current liabilities	43,599		58,067
Non-current liabilities	213,517		186,631



	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Natural gas and oil revenues	$	38,141		$	31,091		$	114,178		$	68,513
Income (loss) from operations	133			(4,929		)	(162		)	(28,282		)
Net income (loss)	(1,838		)	5,056			18,102			(41,183		)

Laramie Energy's net (loss) income for the three and nine months ended September 30, 2017 includes $12.3 million and $38.1 million of depreciation, depletion, and amortization (“DD&A”) and $2.3 million and $35.2 million of unrealized gain on derivative instruments, respectively. Laramie Energy’s net income (loss) for the three and nine months ended September 30, 2016 includes $13.5 million and $34.1 million of DD&A and $12.7 million of unrealized gain and $16.8 million of unrealized loss on derivative instruments, respectively.

At September 30, 2017 and December 31, 2016, our equity in the underlying net assets of Laramie Energy exceeded the carrying value of our investment by approximately $63.8 million and $67.8 million, respectively. This difference arose due to lack of control and marketability discounts and an other-than-temporary impairment of our equity investment in Laramie Energy in 2015. We attributed this difference to natural gas and crude oil properties and are amortizing the difference over 15 years based on the estimated timing of production of proved reserves.