This excerpt taken from the CLR 10-K filed Feb 27, 2009.
Non-producing properties consist of undeveloped leasehold costs and costs associated with the purchase of proved undeveloped reserves. Individually significant non-producing properties are periodically assessed for impairment of value and a loss is recognized at the time of impairment. Other non-producing properties are amortized on a composite method based on the Companys estimated experience of successful drilling and the average holding period. Impairment of non-producing properties was $16.6 million, $13.2 million and $5.4 million for 2008, 2007, and 2006 respectively.
Continental Resources, Inc. and Subsidiary
Notes to Consolidated Financial Statements(continued)
In accordance with the provisions of SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, the Company recognizes impairment expenses for developed oil and gas properties and other long-lived assets when indicators of impairment are present and the undiscounted cash flows from proved and risk-adjusted probable reserves are not sufficient to recover the assets carrying amount. The impairment loss is measured by comparing the fair value of the asset to its carrying amount. Fair values are based on discounted future cash flows. The Companys oil and gas properties are reviewed for indicators of impairment on a field-by-field basis, resulting in the recognition of impairment provisions of $12.3 million, $4.7 million and $6.3 million, respectively, for 2008, 2007 and 2006. The majority of the impairment recognized in these years relates to fields comprised of a small number of properties or single wells on which the Company does not expect sufficient future net cash flows to recover its carrying cost.