Summary of Significant Accounting Policies | NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The consolidated financial statements include the operations of the Partnership and all of its wholly–owned subsidiaries (“we,” “our” or “us”). All intercompany accounts and transactions have been eliminated in consolidation. In the Notes to Consolidated Financial Statements, all dollar and share amounts in tabulations are in thousands of dollars and units, respectively, unless otherwise indicated. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We base our estimates and judgments on historical experience and on various other assumptions and information that are believed to be reasonable under the circumstances. Estimates and assumptions about future events and their effects cannot be perceived with certainty and, accordingly, these estimates may change as new events occur, as more experience is acquired, as additional information is obtained and as our operating environment changes. While we believe that the estimates and assumptions used in the preparation of the consolidated financial statements are appropriate, actual results could differ from those estimates. Cash and Cash Equivalents We consider all highly liquid investments with an original maturity of three months or less at the time of purchase to be cash equivalents. All of our cash and cash equivalents are maintained with several major financial institutions in the United States. Deposits with these financial institutions may exceed the amount of insurance provided on such deposits; however, we regularly monitor the financial stability of these financial institutions and believe that we are not exposed to any significant default risk. Accounts Receivable Accounts receivable from oil, natural gas and natural gas liquids sales are recorded at the invoiced amount and do not bear interest. We routinely assess the financial strength of our customers and bad debts are recorded based on an account–by–account review after all means of collection have been exhausted, and the potential recovery is considered remote. As of December 31, 2016 and 2015, we did no t have any reserves for doubtful accounts, and we did no t incur any expense related to bad debts. We do not have any off–balance sheet credit exposure related to our customers Property and Depreciation Our oil, natural gas and natural gas liquids producing activities are accounted for under the successful efforts method of accounting. Under this method, exploration costs, other than the costs of drilling exploratory wells, are charged to expense as incurred. Costs that are associated with the drilling of successful exploration wells are capitalized if proved reserves are found. Lease acquisition costs are capitalized when incurred. Capitalized costs associated with unproved properties totaled $ 20.9 million and $ 67.6 million as of December 31, 2016 and 2015, respectively. Costs associated with the drilling of exploratory wells that do not find proved reserves, geological and geophysical costs and costs of certain non–producing leasehold costs are expensed as incurred. For 2016, 2015 and 2014, we recorded dry hole and exploration costs of $ 0.7 million, $ 3.7 million and $ 6.7 million, respectively. No gains or losses are recognized upon the disposition of proved oil and natural gas properties except in transactions such as the significant disposition of an amortizable base that significantly affects the unit–of–production amortization rate. Sales proceeds are credited to the carrying value of the properties. The capitalized costs of our producing oil and natural gas properties are depreciated and depleted by the units–of–production method based on the ratio of current production to estimated total net proved reserves as estimated by independent petroleum engineers. Proved developed reserves are used in computing unit rates for drilling and development costs and total proved reserves are used for depletion rates of leasehold and pipeline costs. Other property is stated at cost less accumulated depreciation, which is computed using the straight–line method based on estimated economic lives ranging from three to 25 years. We expense costs for maintenance and repairs in the period incurred. Significant improvements and betterments are capitalized if they extend the useful life of the asset. Impairment of Oil and Natural Gas Properties We evaluate our proved oil and natural gas properties and related equipment and facilities for impairment whenever events or changes in circumstances indicate that the carrying amounts of such properties may not be recoverable. The determination of recoverability is made based upon estimated undiscounted future net cash flows. The amount of impairment loss, if any, is determined by comparing the fair value, as determined by a discounted cash flow analysis, with the carrying value of the related asset. For 2016, 2015 and 2014, we recorded impairment charges of $89.5 million, $ 86.9 million and $ 103.3 million, respectively, related to proved oil and natural gas properties as the carrying amounts of such properties were determined not to be recoverable (see Note 7). The $89.5 million of impairment for 2016 related to oil and natural gas properties in the Barnett Shale which were sold during December 2016 (see Note 5). Since December 31, 2016, commodity prices have continued to fluctuate. If commodity prices significantly decrease before March 31, 2017, or in future quarters, we could have additional impairments of our oil and natural gas properties. Unproved oil and natural gas properties are assessed periodically on a property–by–property basis, and any impairment in value is recognized. For 2016, 2015 and 2014, we recorded impairment charges of $41.8 million, $ 49.8 million and $ 10.7 million, respectively, related to unproved oil and natural gas properties where we had a change in development plans for the acreage. Goodwill We recorded $65.9 million of goodwill in conjunction with our October 2015 acquisitions (see Note 4). Goodwill was calculated as the excess of the purchase price over the estimated fair values of the assets acquired net of the liabilities assumed in the acquisitions. The goodwill was not amortized, but was evaluated for impairment as the declining oil and natural price environment indicated the carrying value of goodwill may not be recoverable (see Note 7). The changes in the carrying amount of goodwill are as follows: Balance as of December 31, 2014 $ - Goodwill acquired during the year 65,924 Impairment losses (65,924) Balance as of December 31, 2015 $ - Restricted Cash Restricted cash represents proceeds from the sale of certain oil and natural gas properties we deposited with a qualified intermediary to facilitate like–kind exchange transactions pursuant to Section 1031 of the Internal Revenue Code. Asset Retirement Obligations An asset retirement obligation (“ARO”) represents the future abandonment costs of tangible assets, such as wells, service assets, and other facilities. We record an ARO and capitalize the asset retirement cost in oil and natural gas properties in the period in which the retirement obligation is incurred based upon the fair value of an obligation to perform site reclamation, dismantle facilities or plug and abandon wells. After recording these amounts, the ARO is accreted to its future estimated value using an assumed cost of funds and the additional capitalized costs are depreciated on a unit–of–production basis. If the ARO is settled for an amount other than the recorded amount, a gain or loss is recognized. Revenue Recognition Oil, natural gas and natural gas liquids revenues are recognized when production is sold to a purchaser at fixed or determinable prices, when delivery has occurred and title has transferred and collectability of the revenue is reasonably assured. We follow the sales method of accounting for natural gas revenues. Under this method of accounting, revenues are recognized based on volumes sold, which may differ from the volume to which we are entitled based on our working interest. An imbalance is recognized as a liability only when the estimated remaining reserves will not be sufficient to enable the under–produced owner(s) to recoup its entitled share through future production. Under the sales method, no receivables are recorded where we have taken less than our share of production. There were no significant gas imbalances at December 31, 2016 or 2015. We own and operate a network of natural gas gathering systems in the Appalachian Basin and the Monroe field in Northern Louisiana which gather and transport owned natural gas and a small amount of third party natural gas to intrastate, interstate and local distribution pipelines. Natural gas gathering and transportation revenue is recognized when the natural gas has been delivered to a custody transfer point. Income Taxes We are a partnership that is not taxable for federal income tax purposes. As such, we do not directly pay federal income tax. As appropriate, our taxable income or loss is includable in the federal income tax returns of our partners. Since we do not have access to information regarding each partner’s tax basis, we cannot readily determine the total difference in the basis of our net assets for financial and tax reporting purposes. We record our obligations under the Texas gross margin tax as “Income taxes” in our consolidated statement of operations. In October 2015, we acquired Belden & Blake Corporation (“Belden”), a taxable entity (see Note 4). We used the asset and liability method of accounting for income taxes. Under this method, deferred taxes were provided for temporary differences as of the date of acquisition between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. In December 2015, Belden was converted from a corporation into a single member limited liability company (see Note 12). Earnings per Limited Partner Unit We use the two–class method to compute earnings per limited partner unit. The two-class method is an earnings allocation formula that determines earnings per unit for our common units and participating securities as if all earnings for the period had been distributed. As our unvested phantom units and our earned but unvested performance units participate in dividends on an equal basis with our common units, they are considered to be participating securities. Earnings used in the determination of earnings per limited partner unit for the current reporting period are reduced by the amount of earnings allocated to the general partner and available cash that will be distributed to the limited partners and the participating securities. The undistributed earnings, if any, are then allocated to the limited partners and the participating securities in accordance with the terms of the partnership agreement. Basic and diluted earnings per limited partner unit are then calculated by dividing earnings, after deducting the amount allocated to the general partner and the earnings attributable to the participating securities, by the weighted average number of outstanding limited partner units during the period. Derivatives We monitor our exposure to various business risks, including commodity price and interest rate risks, and use derivatives to manage the impact of certain of these risks. Our policies do not permit the use of derivatives for speculative purposes. We use energy derivatives for the purpose of mitigating risk resulting from fluctuations in the market price of oil, natural gas and natural gas liquids. We have elected not to designate our derivatives as hedging instruments . Changes in the fair value of derivatives are recorded immediately to earnings as “Gain (loss) on derivatives, net” in our consolidated statements of operations. Concentration of Credit Risk All of our derivative contracts are with major financial institutions who are also lenders under our credit facility. Should one of these financial counterparties not perform, we may not realize the benefit of some of our derivative contracts and we could incur a loss. As of December 31, 2016, all of our counterparties have performed pursuant to their derivative contracts. Our oil, natural gas and natural gas liquids revenues are derived principally from uncollateralized sales to numerous companies in the oil and natural gas industry; therefore, our customers may be similarly affected by changes in economic and other conditions within the industry. We have experienced no significant credit losses on such sales in the past. In 2016, three customers accounted for 18.5% , 13.4% and 10.4% , respectively, of our consolidated oil, natural gas and natural gas liquids revenues. In 2015, two customers accounted for 17.1% and 10.8% , respectively, of our consolidated oil, natural gas and natural gas liquids revenues. In 2014, no customer accounted for greater than 10 % of our consolidated oil, natural gas and natural gas liquids revenues. We believe that the loss of a major customer would have a temporary effect on our revenues but, that over time, we would be able to replace our major customers. Recent Accounting Standards In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014–09, Revenue from Contracts with Customers. This ASU superseded virtually all of the revenue recognition guidance in generally accepted accounting principles in the United States. The core principle of the five–step model is that an entity will recognize revenue when it transfers control of goods or services to customers at an amount that reflects the consideration to which it expects to be entitled in exchange for those goods or services. Entities can choose to apply the standard using either the full retrospective approach or a modified retrospective approach. The provisions of ASU 2014–09 are applicable to annual reporting periods beginning after December 15, 2017 and interim periods within those annual periods. We plan to implement ASU 2014-09 as of January 1, 2018 using the modified retrospective method with the cumulative effect, if any, of initial adoption to be recognized at the date of initial application. We are in the initial stages of our evaluation of the impact of the new standard on our accounting policies, processes, system requirements and financial reporting. Based on the evaluation performed to date, we expect to identify similar performance obligations as compared with deliverables and separate units of account previously identified, and we expect the timing of our revenue to remain the same. We will continue to assess the impact of adopting this ASU. In August 2014, the FASB issued ASU No. 2014–15, Presentation of Financial Statements – Going Concern. This ASU amends the accounting guidance for the presentation and disclosure of uncertainties about an entity’s ability to continue as a going concern. It requires management to evaluate and disclose whether there is substantial doubt about its ability to continue as a going concern. Management should consider relevant conditions or events that are known or reasonably known on the date the financial statements are issued. The provisions of ASU 2014–15 are applicable to the annual reporting period ending after December 15, 2016 and for annual periods and interim periods thereafter. The adoption of this ASU did not have a material impact on our consolidated financial statements. In September 2015, the FASB issued ASU 2015–16, Simplifying the Accounting for Measurement Period Adjustments. To simplify the accounting for adjustments made to provisional amounts, ASU 2015–16 requires that the acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amount is determined. The provisions of ASU 2015–16 are effective for fiscal years beginning after December 15, 2015 and interim periods within those fiscal years. The adoption of this ASU did not have a material impact on our consolidated financial statements. In February 2016, the FASB issued ASU No. 2016-02 , Leases . The main objective of ASU 2016-02 is to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The main difference between previous GAAP and Topic 842 is the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases. ASU 2016-02 requires lessees to recognize assets and liabilities arising from leases on the balance sheet. ASU 2016-02 further defines a lease as a contract that conveys the right to control the use of identified property, plant, or equipment for a period of time in exchange for consideration. Control over the use of the identified asset means that the customer has both (1) the right to obtain substantially all of the economic benefit from the use of the asset and (2) the right to direct the use of the asset. ASU 2016-02 requires disclosures by lessees and lessors to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. For public entities, ASU 2016-02 is effective for financial statements issued for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years; early application is permitted. We are in the initial stages of our evaluation of the impact of this new standard on our accounting policies, processes, system requirements and financial reporting. In March 2016, the FASB issued ASU No. 2016–09, Compensation – Stock Compensation . This ASU simplifies several aspects of the accounting for employee share–based payment transactions, including the accounting for income taxes, forfeitures and statutory withholding requirements, as well as classification in the statement of cash flows. The provisions of ASU 2016–09 are applicable to annual reporting periods beginning after December 15, 2016 and interim periods within those annual periods. Early adoption is permitted for financial statements that have not yet been previously issued. We do not expect that adopting this ASU will have a material impact on our consolidated financial statements. In August 2016, the FASB issued ASU No. 2016–15, Statement of Cash Flows . This ASU addresses certain cash flow issues with the objective of reducing the existing diversity in practice in how the cash receipts and cash payments are presented and classified in the statement of cash flows. The provisions of ASU 2016–15 are applicable to annual reporting periods beginning after December 15, 2017 and interim periods within those annual periods. Early adoption is permitted for financial statements that have not yet been previously issued. We do not expect that adopting this ASU will have a material impact on our consolidated financial statements. In November 2016, the FASB issued ASU No. 2016-18: Statement of Cash Flows– Restricted Cash . The main objective of ASU 2016-18 is to address the diversity that exists in the classification and presentation of changes in restricted cash on the statement of cash flows. The amendments in ASU 2016-18 require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents and amounts generally described as restricted cash or restricted cash equivalents. Thus, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning of period and end of period total amounts shown on the statement of cash flows. For public entities, ASU 2016-18 is effective for financial statements issued for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years; early application is permitted. We do not expect that adopting this ASU will have a material impact on our consolidated financial statements. No other new accounting pronouncements issued or effective during the year ended December 31, 2016 have had or are expected to have a material impact on our consolidated financial statements. Subsequent Events We evaluated subsequent events for appropriate accounting and disclosure through the date these consolidated financial statements were issued. |