Property and equipment | 9 Months Ended |
Sep. 30, 2013 |
Property Plant And Equipment [Abstract] | ' |
Property and equipment | ' |
4. Property and equipment |
Oil and natural gas properties |
The following table sets forth the capitalized costs under the successful efforts method for our oil and natural gas properties as of: |
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| | | | | | | | |
| | September 30, 2013 | | | December 31, 2012 | |
| | (in thousands) | |
Oil and natural gas properties, proved: | | | | | | | | |
Turkey | | $ | 252,866 | | | $ | 229,462 | |
Bulgaria | | | 1,204 | | | | 2,036 | |
| | | | | | | | |
Total oil and natural gas properties, proved | | | 254,070 | | | | 231,498 | |
Oil and natural gas properties, unproved: | | | | | | | | |
Turkey | | | 62,564 | | | | 68,938 | |
Bulgaria | | | 268 | | | | — | |
| | | | | | | | |
Total oil and natural gas properties, unproved | | | 62,832 | | | | 68,938 | |
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Gross oil and natural gas properties | | | 316,902 | | | | 300,436 | |
Accumulated depletion | | | (91,038 | ) | | | (74,099 | ) |
| | | | | | | | |
Net oil and natural gas properties | | $ | 225,864 | | | $ | 226,337 | |
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At September 30, 2013 and December 31, 2012, we excluded $2.7 million and $1.8 million, respectively, from the depletion calculation for proved development wells currently in progress and for costs associated with fields currently not in production. |
At September 30, 2013, the capitalized costs of our net oil and natural gas properties included $38.7 million relating to acquisition costs of proved properties, which are being amortized by the unit-of-production method using total proved reserves, and $121.6 million relating to well costs and additional development costs, which are being amortized by the unit-of-production method using proved developed reserves. |
At December 31, 2012, the capitalized costs of our oil and natural gas properties included $49.5 million relating to acquisition costs of proved properties before a fourth quarter 2012 impairment charge, which are being amortized by the unit-of-production method using total proved reserves, and $105.3 million relating to well costs and additional development costs, which are being amortized by the unit-of-production method using proved developed reserves. |
During the nine months ended September 30, 2013, we incurred approximately $37.0 million in exploratory drilling costs, of which $6.1 million was included in exploration, abandonment and impairment expense, $16.1 million was reclassified from unproved properties to proved properties and $14.8 million remained capitalized at September 30, 2013. No exploratory well costs were reclassified to proved properties in the three months ended September 30, 2013. Uncertainties affect the recoverability of costs of our oil and natural gas properties, as the recovery of the costs are dependent upon us maintaining licenses in good standing and achieving commercial production or sale. |
Capitalized cost greater than one year |
As of September 30, 2013, we had $2.7 million of exploratory well costs capitalized for the Kazanci-5 well, which we spud in September 2012. We recently finished a long-term pressure build up on the current completion. We have identified potential pay up-hole. We are evaluating, with our partners, whether to test another unconventional zone or move up to the conventional pay and establish production. |
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Dry-hole costs |
As of June 30, 2013, we had $4.3 million of exploratory well costs capitalized for the Pancarkoy-1 well, which we began drilling in the fourth quarter of 2010. After the second fracture stimulation of the Pancarkoy-1 well, commercial natural gas production could not be sustained due to the high amount of water production. A third fracture stimulation of the Pancarkoy-1 well was performed in April 2012, but commercial production could not be sustained due to high water production. In the fourth quarter of 2012, we tested the up-hole interval of the well. A further fracture stimulation of this well was performed in the second quarter of 2013, but commercial production could not be sustained. As a result, we have classified this well as a dry hole during the three months ended June 30, 2013. |
The Meneske-1 well was spud in November 2011, and we had capitalized $1.9 million of exploratory well costs for this well as of June 30, 2013. After further review, based on the results of other nearby wells and the expected high tie-in costs of the Meneske-1 well, we have classified this well as a dry hole during the three months ended June 30, 2013. |
The Suleymaniye-2 well was spud in December 2011, and we had capitalized $0.9 million of exploratory well costs for this well as of June 30, 2013. After being evaluated for artificial lift and based on the results of other nearby wells, we have classified this well as a dry hole during the three months ended June 30, 2013. |
During the three months ended September 30, 2013, we recorded $0.7 million of dry-hole costs primarily relating to two wells drilled in the third quarter. |
Of the $11.8 million of dry-hole costs expensed during the nine months ended September 30, 2013, approximately $4.7 million was related to cash spent during 2013. |
Impairment and abandonment |
During the three and nine months ended September 30, 2013, we recorded $1.5 million and $6.2 million, respectively, in impairment and abandonment charges on our proved and unproved properties, primarily related to our Malkara license. We recorded $1.5 million in impairment charges on our proved properties during the nine months ended September 30, 2012, primarily due to downward revisions in natural gas reserves in our Alpullu field. |
Equipment and other property |
The historical cost of equipment and other property, presented on a gross basis with accumulated depreciation, is summarized as follows: |
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| | | | | | | | |
| | September 30, 2013 | | | December 31, 2012 | |
| | (in thousands) | |
Other equipment | | $ | 2,506 | | | $ | 2,013 | |
Inventory | | | 26,842 | | | | 20,517 | |
Gas gathering system and facilities | | | 4,706 | | | | 5,369 | |
Vehicles | | | 232 | | | | 131 | |
Leasehold improvements, office equipment and software | | | 7,943 | | | | 7,717 | |
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Gross equipment and other property | | | 42,229 | | | | 35,747 | |
Accumulated depreciation | | | (6,987 | ) | | | (5,932 | ) |
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Net equipment and other property | | $ | 35,242 | | | $ | 29,815 | |
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We classify our materials and supply inventory, including steel tubing and casing, as long-term assets because such materials will ultimately be classified as long-term assets when the material is used in the drilling of a well. |
At September 30, 2013, we excluded $26.8 million of inventory and $0.6 million of software from depreciation, as the inventory and software had not been placed into service. At December 31, 2012, we excluded $20.5 million of inventory from depreciation, as the inventory had not been placed into service. |