67
(2) Represents principal amounts of our 2.625% convertible senior notes due 2019 and our 3.125% convertible senior notes due
2024 and interest payable semi-annually in arrears.
In the future, we may be party to additional contractual arrangements including but not limited to arrangements listed below,
which will subject us to further contractual obligations:
•
credit facilities and other debt instruments;
•
contracts for the lease of additional drilling rigs;
•
contracts for the provision of production facilities;
•
infrastructure construction contracts; and
•
long term oil and gas property lease arrangements.
Off-Balance Sheet Arrangements
As of December 31, 2015, we did not have any off-balance sheet arrangements.
Critical Accounting Policies
This discussion of financial condition and results of operations is based upon the information reported in our consolidated
financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States. The
preparation of our financial statements requires us to make assumptions and estimates that affect the reported amounts of assets,
liabilities, revenues and expenses, as well as the disclosure of contingent assets and liabilities at the date of our financial statements.
We base our assumptions and estimates on historical experience and other sources that we believe to be reasonable at the time. Actual
results may vary from our estimates. Our significant accounting policies are detailed in Note 1 to our consolidated financial
statements. We have outlined below certain accounting policies that are of particular importance to the presentation of our financial
position and results of operations and require the application of significant judgment or estimates by our management.
Revenue Recognition.
We plan to follow the “sales” (or cash) method of accounting for oil and gas revenues. Under this
method, we will recognize revenues on the volumes sold. The volumes sold may be more or less than the volumes to which we are
entitled based on our ownership interest in the property. These differences result in a condition known in the industry as a production
imbalance. For the year ended December 31, 2015, no revenues have been recognized in our financial statements.
We recognize interest income on bank balances and deposits on a time basis, by reference to the principal outstanding and at the
effective interest rate applicable.
Cash and Cash Equivalents.
Cash and cash equivalents consist of all demand deposits and funds invested in highly liquid
instruments with original maturities of three months or less from the date of purchase. Demand deposits typically exceed federally
insured limits; however we periodically assess the financial condition of the institutions where these funds are held as well as the
credit ratings of the issuers of the highly liquid instruments and believe that the credit risk is minimal.
Investments.
Our investments consist entirely of debt securities. The debt securities are carried at amortized costs and
classified as held-to-maturity as we have the positive intent and ability to hold them until they mature. The net carrying value of held-
to-maturity securities is adjusted for amortization of premiums and accretion of discounts to maturity over the life of the securities.
Money market funds and certificates of deposit are carried at face value.
We conduct a regular assessment of our debt securities with unrealized losses to determine whether securities have other-than-
temporary impairment. This assessment considers, among other factors, the nature of the securities, credit rating or financial condition
of the issuer, the extent and duration of the unrealized loss, market conditions and whether we intend to sell or whether it is more
likely than not that we will be required to sell the debt securities.
Property, Plant and Equipment.
We use the “successful efforts” method of accounting for our oil and gas properties.
Acquisition costs for unproved leasehold properties and costs of drilling exploration wells are capitalized pending determination of
whether proved reserves can be attributed to the areas as a result of drilling those wells. Under the successful efforts method of
accounting, proved leasehold costs are capitalized and amortized over the proved developed and undeveloped reserves on a units-of-
