Cobalt International Energy, Inc.
Notes to Consolidated Financial Statements (Continued)
F-18
8. Property, Plant, and Equipment (Continued)
Unproved Oil and Gas Properties
As of December 31, 2015 and 2014, the Company has the following unproved property acquisition costs, net of valuation
allowance on the consolidated balance sheets:
December 31,
2015
December 31,
2014
($ in thousands)
Individual oil and gas leaseholds with carrying
value greater than $1 million ............................................. $ 305,270 $
322,727
Individual oil and gas leaseholds with carrying
value less than $1 million ..................................................
77,706
83,916
382,976
406,643
Accumulated valuation allowance........................................
(175,963) (208,725)
Total oil and gas leasehold......................................................... $ 207,013 $
197,918
As of December 31, 2015 and 2014, the Company has $207.1 million and $197.9 million, respectively, net of valuation
allowance, of unproved property acquisition costs relating to its U.S. Gulf of Mexico properties. In 2015, the Company paid a total
consideration of $33.1 million for the acquisition of ownership interests in unproved oil and gas properties in the deepwater U.S. Gulf
of Mexico. In June and July of 2014, the Company paid a total consideration of $27.8 million for the acquisition of ownership
interests in unproved oil and gas properties in the deepwater U.S. Gulf of Mexico. On February 26, 2013, the Company executed a
Purchase and Sale agreement (the "PSA") to sell its ownership interests on an unproved oil and gas property in Mississippi Canyon
Block 209 for a total consideration of $5.6 million. The Company received $1.5 million at closing and an additional $1.5 million in
September 2013 when the buyer commenced operations on the property. Pursuant to the terms and conditions of the PSA, the
Company received the remaining $2.6 million that was contingent upon the purchaser’s commencement of production on this
property, which occurred in 2015. For each of the years ended December 31, 2015 and 2013, the Company recognized a gain of
$3.0 million on the sale of assets as a result of this transaction.
Acquisition costs of unproved properties are assessed for impairment during the holding period and transferred to proved oil and
gas properties to the extent associated with successful exploration activities. Oil and gas leases for unproved properties in the U.S.
Gulf of Mexico with a carrying value greater than $1.0 million are assessed individually for impairment based on the Company’s
current exploration plans and an allowance for impairment is provided if impairment is indicated. Leases that are individually less than
$1.0 million in carrying value or are near expiration are amortized over the terms of the leases at rates that provide for full
amortization of leases upon lease expiration. These leases have expiration dates ranging from 2016 through 2024. As of December 31,
2015 and 2014, the balance for unproved properties that were subject to amortization before impairment provision was $77.7 million
and $83.9 million, respectively. The Company recorded a lease impairment allowance of $26.9 million, $68.0 million and
$19.4 million for the years ended December 31, 2015, 2014 and 2013, respectively.
