Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2013 |
Summary Of Significant Accounting Policies [Abstract] | ' |
Principles of Consolidation | ' |
Principles of Consolidation |
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The Consolidated Financial Statements include the accounts of Carbon and its consolidated subsidiaries. The Company owns 100% of Nytis USA. Nytis USA owns approximately 99% of Nytis LLC. Nytis LLC also holds interests in various oil and gas partnerships. |
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For partnerships where the Company has a controlling interest, the partnerships are consolidated. The Company is currently consolidating 46 partnerships. In these instances, the Company reflects the non-controlling ownership interest in partnerships and subsidiaries as non-controlling interests on its consolidated combined statements of operations and also reflects the non-controlling ownership interest in the net assets of the partnerships as non-controlling interests within stockholders’ equity on its consolidated balance sheets. All significant intercompany accounts and transactions have been eliminated. |
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In accordance with established practice in the oil and gas industry, the Company’s Consolidated Financial Statements also include its pro-rata share of assets, liabilities, income, lease operating costs and general and administrative expenses of the oil and gas partnerships in which the Company has a non-controlling interest. |
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Non-majority owned investments that do not meet the criteria for pro-rata consolidation are accounted for using the equity method when the Company has the ability to significantly influence the operating decisions of the investee. When the Company does not have the ability to significantly influence the operating decisions of an investee, the cost method is used. All transactions, if any, with investees have been eliminated in the accompanying Consolidated Financial Statements. |
Cash and Cash Equivalents | ' |
Cash and Cash Equivalents |
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Cash and cash equivalents in excess of daily requirements have been generally invested in money market accounts, certificates of deposits and other cash equivalents with maturities of three months or less. Such investments are deemed to be cash equivalents for purposes of the Consolidated Financial Statements. The carrying amount of cash equivalents approximates fair value because of the short maturity and high credit quality of these investments. |
Accounts Receivable | ' |
Accounts Receivable |
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The Company’s accounts receivable are primarily comprised of oil and natural gas revenues from producing activities conducted primarily in Illinois, Indiana, Kentucky, Ohio, Tennessee and West Virginia and from other exploration and production companies and individuals who own working interests in the properties that the Company operates. The Company grants credit to all qualified customers, which potentially subjects the Company to credit risk resulting from, among other factors, adverse changes in the industries in which the Company operates and the financial condition of its customers. The Company continuously monitors collections and payments from its customers and maintains an allowance for doubtful accounts based upon its historical experience and any specific customer collection issues that it has identified. At December 31, 2013 and 2012, the Company had not identified any collection issues related to its oil and gas operations and as a consequence no allowance for doubtful accounts was provided for on those dates. |
Oil and Natural Gas Sales | ' |
Oil and Natural Gas Sales |
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The Company principally sells its oil and natural gas production to various purchasers in the industry. The table below presents percentages by purchaser that account for 10% or more of our total oil and natural gas sales for the years ended December 31, 2013 and 2012. There are a number of purchasers in the areas that the Company sells its production to and accordingly, management does not believe that changing its primary purchasers or a loss of any other single purchaser would materially impact the Company’s business. |
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Purchaser | | 2013 | | | 2012 | |
Purchaser A | | | 39 | % | | | 34 | % |
Purchaser B | | | 22 | % | | | 29 | % |
Purchaser C | | | 11 | % | | | - | |
Purchaser D | | | 7 | % | | | 10 | % |
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The Company recognizes a receivable or a liability, whichever is appropriate, for revenues associated with over-deliveries or under-deliveries of natural gas to purchasers. A purchaser imbalance receivable occurs when the Company delivers more natural gas than it nominated to deliver to the purchaser and the purchaser pays only for the nominated amount. Conversely, a purchaser imbalance liability occurs when the Company delivers less natural gas than it nominated to deliver to the purchaser and the purchaser pays for the amount nominated. As of December 31, 2013, the Company has a purchaser imbalance liability of approximately $117,000 which is recognized as a current liability in the Company’s consolidated balance sheet. |
Accounting for Oil and Gas Operations | ' |
Accounting for Oil and Gas Operations |
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The Company uses the full cost method of accounting for oil and gas properties. Accordingly, all costs incidental to the acquisition, exploration and development of oil and gas properties, including costs of undeveloped leasehold, dry holes and leasehold equipment, are capitalized. Overhead costs incurred that are directly identified with acquisition, exploration and development activities undertaken by the Company for its own account, and which are not related to production, general corporate overhead or similar activities, are also capitalized. |
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Unproved properties are excluded from amortized capitalized costs until it is determined whether or not proved reserves can be assigned to such properties. The Company assesses its unproved properties for impairment at least annually. Significant unproved properties are assessed individually. |
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Capitalized costs are depleted by an equivalent unit-of-production method, converting oil to gas at the ratio of one barrel of oil to six thousand cubic feet of natural gas. Depletion is calculated using capitalized costs, including estimated asset retirement costs, plus estimated future expenditures (based on current costs) to be incurred in developing proved reserves, net of estimated salvage values. |
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No gain or loss is recognized upon disposal of oil and gas properties unless such disposal significantly alters the relationship between capitalized costs and proved reserves. All costs related to production activities, including work-over costs incurred solely to maintain or increase levels of production from an existing completion interval, are charged to expense as incurred. |
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The Company performs a ceiling test quarterly. The full cost ceiling test is a limitation on capitalized costs prescribed by SEC Regulation S-X Rule 4-10. The ceiling test is not a fair value based measurement. Rather, it is a standardized mathematical calculation. The ceiling test provides that capitalized costs less related accumulated depletion and deferred income taxes may not exceed the sum of (1) the present value of future net revenue from estimated production of proved oil and gas reserves using the un-weighted arithmetic average of the first-day-of-the month price for the previous twelve month period, excluding the future cash outflows associated with settling asset retirement obligations that have been accrued on the balance sheet, at a discount factor of 10%; plus (2) the cost of properties not being amortized, if any; plus (3) the lower of cost or estimated fair value of unproved properties included in the costs being amortized, if any; less (4) income tax effects related to differences in the book and tax basis of oil and gas properties. Should the net capitalized costs exceed the sum of the components noted above, a ceiling test write-down or impairment would be recognized to the extent of the excess capitalized costs. Such impairments are permanent and cannot be recovered in future periods even if the sum of the components noted above exceeds capitalized costs in future periods. |
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For the year ended December 31, 2013, the Company did not recognize a ceiling test impairment as the Company’s full cost pool did not exceed the ceiling limitation. For the year ended December 31, 2012, the Company recognized a ceiling test impairment of approximately $15.4 million. Future declines in oil and natural gas prices could result in additional impairments of our oil and gas properties in future periods. |
Other Property and Equipment | ' |
Other Property and Equipment |
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Other property and equipment are recorded at cost upon acquisition. Depreciation of other property and equipment over their estimated useful lives is provided for using the straight-line method over three to seven years. |
Long-Lived Assets | ' |
Long-Lived Assets |
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The Company reviews its long-lived assets other than oil and gas properties for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recovered. The Company looks primarily to the estimated undiscounted future cash flows in its assessment of whether or not long-lived assets have been impaired. |
Investments in Affiliates | ' |
Investments in Affiliates |
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Investments in non-consolidated affiliates are accounted for under either the equity or cost method of accounting as appropriate. The cost method of accounting is used for investments in affiliates in which the Company has less than 20% of the voting interests of a corporate affiliate or less than 5% interest of a partnership or limited liability company and does not have significant influence. Investments in non-consolidated affiliates, accounted for using the cost method of accounting, are recorded at cost and an impairment assessment of each investment is made annually to determine if a decline in the fair value of the investment, other than temporary, has occurred. A permanent impairment is recognized if a decline in the fair value occurs. If the Company holds between 20% and 50% of the voting interest in non-consolidated corporate affiliates or greater than a 5% interest of a partnership or limited liability company and exercises significant influence or control, the equity method of accounting is used to account for the investment. The Company’s investment in an affiliate that is accounted for using the equity method of accounting increases or decreases by the Company’s share of the affiliate’s profits or losses and such profits or losses are recognized in the Company’s statements of operations. The Company reviews equity method investments for impairment whenever events or changes in circumstances indicate that an other than temporary decline in value has occurred. The amount of the impairment is based on quoted market prices, where available, or other valuation techniques. |
Asset Retirement Obligations | ' |
Asset Retirement Obligations |
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The Company’s asset retirement obligations (“ARO”) relate to future costs associated with the plugging and abandonment of oil and gas wells, removal of equipment and facilities from leased acreage and returning such land to its original condition. The fair value of a liability for an asset retirement obligation is recorded in the period in which it is incurred and the cost of such liability is recorded as an increase in the carrying amount of the related long-lived asset by the same amount. The liability is accreted each period and the capitalized cost is depleted on a units-of-production basis as part of the full cost pool. Revisions to estimated AROs result in adjustments to the related capitalized asset and corresponding liability. |
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The estimated ARO liability is based on estimated economic lives, estimates as to the cost to abandon the wells in the future, and federal and state regulatory requirements. The liability is discounted using a credit-adjusted risk-free rate estimated at the time the liability is incurred or increased as a result of a reassessment of expected cash flows and assumptions inherent in the estimation of the liability. Upward revisions to the liability could occur due to changes in estimated abandonment costs or well economic lives, or if federal or state regulators enact new requirements regarding the abandonment of wells. AROs are valued utilizing Level 3 fair value measurement inputs. |
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The following table is a reconciliation of ARO for the years ended December 31, 2013 and 2012. |
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| | Year Ended December 31, | |
(in thousands) | | 2013 | | | 2012 | |
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Balance at beginning of year | | $ | 2,321 | | | $ | 2,149 | |
Accretion expense | | | 138 | | | | 105 | |
Additions during period | | | 123 | | | | 75 | |
Additions assumed with acquired properties | | | 117 | | | | - | |
Costs incurred | | | - | | | | (8 | ) |
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Balance at end of year | | $ | 2,699 | | | $ | 2,321 | |
Financial Instruments | ' |
Financial Instruments |
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The Company’s financial instruments include cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities, derivative instruments and its credit facility. The carrying value of cash and cash equivalents, accounts receivable, payables and accrued liabilities are considered to be representative of their fair value, due to the short maturity of these instruments. The Company’s derivative instruments are recorded at fair value, as discussed below and in Note 10. The carrying amount of the Company’s credit facility approximated fair value since borrowings bear interest at variable rates, which are representative of the Company’s credit adjusted borrowing rate. |
Commodity Derivative Instruments | ' |
Commodity Derivative Instruments |
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The Company enters into commodity derivative contracts to manage its exposure to oil and natural gas price volatility with an objective to achieve more predictable cash flows. Commodity derivative contracts may take the form of futures contracts, swaps or options. The Company has elected not to designate its derivatives as cash flow hedges. All derivatives are initially and subsequently measured at estimated fair value and recorded as assets or liabilities on the consolidated balance sheets and the changes in fair value are recognized as gains or losses in revenues in the consolidated statements of operations. |
Income Taxes | ' |
Income Taxes |
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Carbon accounts for income taxes using the asset and liability method, whereby deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases, as well as the future tax consequences attributable to the future utilization of existing tax net operating losses and other types of carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences and carryforwards are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. |
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In assessing the need for a valuation allowance on our deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon whether future book income is sufficient to reverse existing temporary differences that give rise to deferred tax assets, as well as whether future taxable income is sufficient to utilize net operating loss and credit carryforwards. Assessing the need for, or the sufficiency of, a valuation allowance requires the evaluation of all available evidence, both negative and positive. Negative evidence considered by management primarily includes a history of book losses which are driven primarily from ceiling test write-downs, which are not fair value based measurements. Positive evidence considered by management includes current and forecasted book income over a reasonable period of time. |
Stock - Based Compensation | ' |
Stock - Based Compensation |
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Compensation cost is measured at the grant date, based on the fair value of the awards and is recognized on a straight-line basis over the requisite service period (usually the vesting period). |
Revenue Recognition | ' |
Revenue Recognition |
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The Company accounts for natural gas sales using the entitlements method. The Company accounts for oil sales when title to the product is transferred. Under the entitlements method, revenue is recorded based upon the Company’s share of volumes sold, regardless of whether the Company has taken its proportionate share of volumes produced. The Company records a receivable or payable to the extent it receives less or more than its proportionate share of the related revenue. |
Earnings Per Common Share | ' |
Earnings Per Common Share |
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Basic earnings (loss) per common share is computed by dividing the net income (loss) attributable to common stockholders for the period by the weighted average number of common shares outstanding during the period. The shares of restricted common stock granted to certain officers, directors and employees of the Company are included in the computation of basic net income (loss) per share only after the shares become fully vested. Diluted earnings per common share includes both the vested and unvested shares of restricted stock and the potential dilution that could occur upon exercise of the options and warrants to acquire common stock computed using the treasury stock method, which assumes that the increase in the number of shares is reduced by the number of shares which could have been repurchased by the Company with the proceeds from the exercise of the options and warrants (which were assumed to have been made at the average market price of the common shares during the reporting period). |
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For the year ended December 31, 2013, the diluted income per common share calculation excludes the dilutive effect of approximately 2.7 million common stock equivalents that were out-of-the money and approximately 3.2 million restricted performance units subject to future contingencies. For the year ended December 31, 2012, the Company had approximately 4.7 million common stock equivalents that were excluded from the diluted loss per share as the effect would be anti-dilutive. When a loss exists, as for the year ended December 31, 2012, no potentially dilutive common shares are included in the computation of the diluted per share amount. |
Use of Estimates in the Preparation of Financial Statements | ' |
Use of Estimates in the Preparation of Financial Statements |
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The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and expenses and disclosure of contingent assets and liabilities. Significant items subject to such estimates and assumptions include the carrying value of oil and gas properties, the estimate of proved oil and gas reserve volumes and the related depletion and present value of estimated future net cash flows and the ceiling test applied to capitalized oil and gas properties, determining the amounts recorded for deferred income taxes, stock-based compensation, fair value of derivative instruments and asset retirement obligations. Actual results could differ from those estimates and assumptions used. |
Adopted and Recently Issued Accounting Pronouncements | ' |
Adopted and Recently Issued Accounting Pronouncements |
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In December 2011, the FASB issued Accounting Standards Update No. 2011-11, Balance Sheet: Disclosures about Offsetting Assets and Liabilities (“ASU 2011-11”). The objective of ASU 2011-11 is to require an entity to provide enhanced disclosures that will enable users of its financial statements to evaluate the effect or potential effect of netting arrangements on an entity’s financial position. In January 2013, the FASB issued Accounting Standards Update No. 2013-01, Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities (“ASU 2013-01”), which clarifies that the scope of ASU 2011-11 applies to derivatives accounted for in accordance with FASB ASC Topic 815, Derivatives and Hedging, including bifurcated embedded derivatives, repurchase agreements and reverse repurchase agreements, and securities lending transactions or similar agreements. ASU 2011-11 and ASU 2013-01 are effective for interim and annual reporting periods beginning on or after January 1, 2013 and should be applied retrospectively. The Company adopted ASU 2011-11 and ASU 2013-01 effective January 1, 2013, which did not have an impact on the Company’s consolidated statements other than additional disclosures. |