Investment in Laramie Energy, LLC

As of June 30, 2019, we had a 46.0% ownership interest in Laramie Energy. Laramie Energy is focused on producing natural gas in Garfield, Mesa, and Rio Blanco Counties, Colorado.

Laramie Energy has a $400 million revolving credit facility with a borrowing base currently set at $240 million that is secured by a lien on its natural gas and crude oil properties and related assets. As of June 30, 2019, the balance outstanding on the revolving credit facility was approximately $201.0 million. We are guarantors of Laramie Energy’s credit facility, with 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.

During the second quarter of 2019, we conducted an impairment evaluation of our investment in Laramie Energy as a result of the significant decline in natural gas prices during the latter part of the second quarter of 2019 and determined that the estimated fair value of our investment in Laramie Energy was in the range of $100 million to $123 million compared to a carrying value of $137.4 million. The range was determined using primarily a discounted cash flow approach using pricing forecasts as of quarter end through 2023 and a 5 year historical average for subsequent years. As part of our evaluation, we considered the duration of the decline in fair value, the likelihood that natural gas prices will recover in the near term, the severity of the current decline in natural gas prices and historical pricing trends. We intend and are able to hold our investment in Laramie Energy through the recovery of natural gas prices. Based on these factors, we concluded that the excess of the carrying value of our investment in Laramie Energy over its fair value was not other than temporary and that no impairment loss should be recorded on our statement of operations for the three months ended June 30, 2019. However, sustained downward pressure on natural gas prices could potentially be an indicator of a future other-than-temporary impairment of our investment in Laramie Energy. We will continue to closely monitor these market factors and their effect on the value of our investment in Laramie Energy.

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



	Six Months Ended June 30, 2019
Beginning balance	$	136,656
Equity losses from Laramie Energy	(2,553		)
Accretion of basis difference	3,345
Ending balance	$	137,448

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



	June 30, 2019		December 31, 2018
Current assets	$	21,028	$	28,569
Non-current assets	769,913		788,515
Current liabilities	33,986		41,681
Non-current liabilities	280,047		293,084



	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Natural gas and oil revenues	$	43,270		$	46,750		$	111,194		$	93,431
Income (loss) from operations	(8,205		)	(554		)	5,538			5,490
Net loss	(2,570		)	(8,846		)	(5,553		)	(1,556		)

Laramie Energy’s net loss for the three and six months ended June 30, 2019 includes $21.0 million and $42.4 million of depreciation, depletion, and amortization (“DD&A”) and $8.4 million and $11.1 million of unrealized gains on derivative instruments, respectively. Laramie Energy’s net loss for the three and six months ended June 30, 2018 includes $17.1 million and $32.0 million of DD&A and $8.1 million and $3.5 million of unrealized losses on derivative instruments, respectively.

At June 30, 2019 and December 31, 2018, our equity in the underlying net assets of Laramie Energy exceeded the carrying value of our investment by approximately $81.9 million and $85.2 million, respectively. This difference arose primarily due to lack of control and marketability discounts and an other-than-temporary impairment of our equity investment in Laramie Energy. 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.