Investment in Laramie Energy, LLC

3 Months Ended

Mar. 31, 2020

Equity Method Investments and Joint Ventures [Abstract]

As of March 31, 2020, 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 $220 million that is secured by a lien on its natural gas and crude oil properties and related assets. As of March 31, 2020, the balance outstanding on the revolving credit facility was approximately $190.0 million. We are guarantors of Laramie Energy’s credit facility, with recourse limited to the pledge of our equity interest in 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. On April 23, 2020, Laramie Energy extended the credit facility from its original maturity date of December 15, 2020 to December 15, 2021.

At March 31, 2020, we conducted an impairment evaluation of our investment in Laramie Energy because of (i) the global economic impact of the COVID-19 pandemic, (ii) an increase in the weighted-average cost of capital for energy companies, and (iii) continuing declines in natural gas prices through the first quarter of 2020. Based on our evaluation, we determined that the estimated fair value of our investment in Laramie Energy was $1.9 million, compared to a carrying value of $47.2 million at March 31, 2020. The fair value estimate was determined using a discounted cash flow analysis based on natural gas forward strip prices as of March 31, 2020 for the years 2020 and 2021 of the forecast, and a blend of forward strip pricing and third-party analyst pricing for years 2022 through December 31, 2028. Other significant inputs used in the discounted cash flow analysis included proved and unproved reserves information, forecasts of operating expenditures, and the applicable discount rate. As a result, we recorded an other-than temporary impairment charge of $45.3 million in Equity earnings (losses) from Laramie Energy, LLC on our condensed consolidated statement of operations for the three months ended March 31, 2020.

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



	Three Months Ended March 31, 2020
Beginning balance	$	46,905
Equity earnings from Laramie Energy	263
Impairment of our investment in Laramie Energy	(45,294		)
Ending balance	$	1,874

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



	March 31, 2020		December 31, 2019
Current assets	$	13,839	$	23,367
Non-current assets	385,353		393,575
Current liabilities	17,983		229,687
Non-current liabilities	278,659		85,287



	Three Months Ended March 31,
	2020		2019
Natural gas and oil revenues	$	34,713	$	67,924
Income from operations	1,369		13,743
Net income (loss)	574		(2,983		)

Laramie Energy’s net income for the three months ended March 31, 2020 includes $9.3 million of depreciation, depletion, and amortization (“DD&A”) and $2.4 million of unrealized gains on derivative instruments. Laramie Energy’s net loss for the three months ended March 31, 2019 includes $21.4 million of DD&A and $2.7 million of unrealized gains on derivative instruments.