us-gaap:FullCostMethodOfAccountingForInvestmentsInOilAndGasPropertiesDisclosureTextBlock

DOMINION RESOURCES INC /VA/

Note 14. Ceiling Test

We follow the full cost method of accounting for gas and oil E&P activities prescribed by the SEC. Under the full cost method, capitalized costs are subject to a quarterly ceiling test. Under the ceiling test, amounts capitalized are limited to the present value of estimated future net revenues to be derived from the anticipated production of proved gas and oil reserves, discounted at 10%, assuming period-end hedge-adjusted prices. If net capitalized costs exceed the ceiling at the end of any quarterly period, then a permanent write-down of the assets must be recognized in that period; however, subsequent commodity price increases may be utilized to reduce or eliminate any impairment in accordance with SEC guidelines.

We used prices in effect subsequent to September 30, 2009 to calculate the ceiling test limitation. Using hedge-adjusted prices subsequent to period-end there was no ceiling test impairment. Approximately 3% of our anticipated production is hedged by qualifying cash flow hedges, for which hedge-adjusted prices were used to calculate estimated future net revenue. Excluding the effects of hedge-adjusted prices in calculating the ceiling test limitation would have resulted in a $12 million ($7 million after-tax) ceiling test impairment. Using prices in effect on September 30, 2009 would have resulted in a ceiling test impairment charge of $107 million ($66 million after-tax). Excluding the effects of period-end hedge-adjusted prices in calculating the ceiling test limitation, the impairment would have been $247 million ($148 million after-tax).

At March 31, 2009, we recorded a ceiling test impairment charge of $455 million ($281 million after-tax, including a subsequent $9 million increase for estimated state taxes recorded in the second quarter of 2009) in other operations and maintenance expense in our Consolidated Statement of Income. Excluding the effects of hedge-adjusted prices in calculating the ceiling limitation, the impairment would have been $631 million ($387 million after-tax, including a subsequent update for estimated state taxes recorded in the second quarter of 2009). Following adoption of the SEC’s Final Rule, Modernization of Oil and Gas Reporting effective December 31, 2009, we will be required to use trailing twelve month average natural gas and oil prices when performing the full cost ceiling test calculation.

FOREST OIL CORP

(6) OIL AND GAS PROPERTIES

Full Cost Method of Accounting

The Company uses the full cost method of accounting for oil and gas properties. Separate cost centers are maintained for each country in which the Company has operations. During the periods presented, the Company's primary oil and gas operations were conducted in the United States and Canada. All costs incurred in the acquisition, exploration, and development of properties (including costs of surrendered and abandoned leaseholds, delay lease rentals, dry holes, and overhead related to exploration and development activities) and the fair value of estimated future costs of site restoration, dismantlement, and abandonment activities are capitalized. During the three months ended September 30, 2009 and 2008, Forest capitalized $11.4 million and $11.8 million of general and administrative costs (including stock-based compensation), respectively. During the nine months ended September 30, 2009 and 2008, Forest capitalized $33.5 million and $38.7 million of general and administrative costs (including stock-based compensation), respectively. Interest costs related to significant unproved properties that are under development are also capitalized to oil and gas properties. During the three months ended September 30, 2009 and 2008, the Company capitalized $2.5 million and $4.0 million, respectively, of interest costs attributed to unproved properties. During the nine months ended September 30, 2009 and 2008, the Company capitalized $9.3 million and $14.6 million, respectively, of interest costs attributed to unproved properties.

Depletion of proved oil and gas properties is computed on the units-of-production method, whereby capitalized costs, as adjusted for future development costs and asset retirement obligations, are amortized over the total estimated proved reserves.

Investments in unproved properties are not depleted pending determination of the existence of proved reserves; however, unproved properties are assessed periodically to ascertain whether impairment has occurred. Unproved properties whose costs are individually significant are assessed individually by considering the primary lease terms of the properties, the holding period of the properties, and geographic and geologic data obtained relating to the properties. Where it is not practicable to assess individually the amount of impairment of properties for which costs are not individually significant, such properties are grouped for purposes of assessing impairment. The amount of impairment assessed is added to the costs to be amortized, or is reported as a period expense, as appropriate.

Pursuant to full cost accounting rules, the Company must perform a ceiling test each quarter on its proved oil and gas assets within each separate cost center. The ceiling test provides that capitalized costs less related accumulated depletion and deferred income taxes for each cost center may not exceed the sum of (1) the present value of future net revenue from estimated production of proved oil and gas reserves using current prices, 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 for a cost center exceed the sum of the components noted above, a ceiling test write-down would be recognized to the extent of the excess capitalized costs. As a result of this limitation on capitalized costs, in the first quarter of 2009, the Company recorded a non-cash ceiling test write-down of oil and gas property costs of $1.377 billion in its United States cost center and $199.0 million in its Canada cost center. Accordingly, the accompanying condensed consolidated financial statements reflect a total non-cash ceiling test write-down of oil and gas properties of $1.576 billion for the nine months ended September 30, 2009.

Gain or loss is not recognized on the sale of oil and gas properties unless the sale significantly alters the relationship between capitalized costs and estimated proved oil and gas reserves attributable to a cost center.

MDU RESOURCES GROUP INC

6. Natural gas and oil properties

The Company uses the full-cost method of accounting for its natural gas and oil production activities. Under this method, all costs incurred in the acquisition, exploration and development of natural gas and oil properties are capitalized and amortized on the units-of-production method based on total proved reserves. Any conveyances of properties, including gains or losses on abandonments of properties, are treated as adjustments to the cost of the properties with no gain or loss recognized. Capitalized costs are subject to a “ceiling test” that limits such costs to the aggregate of the present value of future net cash flows from proved reserves based on spot market prices that exist at the end of the period discounted at 10 percent, as mandated under the rules of the SEC, plus the cost of unproved properties less applicable income taxes. Future net revenue is estimated based on end-of-quarter spot market prices adjusted for contracted price changes. If capitalized costs exceed the full-cost ceiling at the end of any quarter, a permanent noncash write-down is required to be charged to earnings in that quarter unless subsequent price changes eliminate or reduce an indicated write-down.

Due to low natural gas and oil prices that existed on March 31, 2009, the Company’s capitalized costs under the full-cost method of accounting exceeded the full-cost ceiling at March 31, 2009. Accordingly, the Company was required to write down its natural gas and oil producing properties. The noncash write-down amounted to $620.0 million ($384.4 million after tax) for the three months ended March 31, 2009. At September 30, 2009, the Company’s full-cost ceiling exceeded the Company’s capitalized cost. However, sustained downward movements in natural gas and oil prices subsequent to September 30, 2009, could result in future write-downs of the Company’s natural gas and oil properties.

The Company hedges a portion of its natural gas and oil production and the effects of the cash flow hedges were used in determining the full-cost ceiling. The Company would have recognized an additional write-down of its natural gas and oil properties of $107.9 million ($66.9 million after tax) as of March 31, 2009, if the effects of cash flow hedges had not been considered in calculating the full-cost ceiling. For more information on the Company’s cash flow hedges, see Note 13.

NEWFIELD EXPLORATION CO /DE/

3. Oil and Gas Assets:

Property and Equipment

Property and equipment consisted of the following at:

	September 30,			December 31,
	2009			2008
	(In millions)

Oil and Gas Properties:
Subject to amortization	$	8,604		$	8,961
Not subject to amortization:
Exploration in progress		271			207
Development in progress		65			71
Capitalized interest		136			129
Fee mineral interests		23			23
Other capital costs:
Incurred in 2009		55			―
Incurred in 2008		222			328
Incurred in 2007		213			242
Incurred in 2006 and prior		280			303
Total not subject to amortization		1,265			1,303
Gross oil and gas properties		9,869			10,264
Accumulated depreciation, depletion and amortization		(4,971	)		(4,550	)
Net oil and gas properties		4,898			5,714
Other property and equipment		91			85
Accumulated depreciation and amortization		(49	)		(41	)
Net other property and equipment		42			44
Property and equipment, net	$	4,940		$	5,758

PETROHAWK ENERGY CORP

3. OIL AND NATURAL GAS PROPERTIES

The Company uses the full cost method of accounting for its investment in oil and natural gas properties. Under this method of accounting, all costs of acquisition, exploration and development of oil and natural gas reserves (including such costs as leasehold acquisition costs, geological expenditures, dry hole costs, tangible and intangible development costs and direct internal costs) are capitalized as the cost of oil and natural gas properties when incurred. To the extent capitalized costs of evaluated oil and natural gas properties, net of accumulated depletion exceed the discounted future net revenues of proved oil and natural gas reserves net of deferred taxes, such excess capitalized costs are charged to expense. Full cost companies use the prices in effect at the end of each accounting quarter to calculate the ceiling test value of their reserves. Subsequent commodity price increases may be utilized to calculate the ceiling value and reserves. However, this option will no longer be available to the Company starting December 31, 2009 due to adoption of the new oil and natural gas reporting requirements.

The Company assesses all items classified as unevaluated property on a quarterly basis for possible impairment or reduction in value. The Company assesses properties on an individual basis or as a group if properties are individually insignificant. The assessment includes consideration of the following factors, among others: intent to drill; remaining lease term; geological and geophysical evaluations; drilling results and activity; the assignment of proved reserves; and the economic viability of development if proved reserves are assigned. During any period in which these factors indicate an impairment, the cumulative drilling costs incurred to date for such property and all or a portion of the associated leasehold costs are transferred to the full cost pool and are then subject to amortization.

At September 30, 2009, the ceiling test value of the Company’s reserves was calculated based on the September 30, 2009 West Texas Intermediate (WTI) posted price of $70.61 per barrel, adjusted by lease for quality, transportation fees, and regional price differentials, and the September 30, 2009 Henry Hub spot market price of $3.30 per million British thermal units (Mmbtu), adjusted by lease for energy content, transportation fees, and regional price differentials. At September 30, 2009, the Company’s net book value of oil and natural gas properties exceeded the ceiling amount by approximately $880 million before tax, $546 million after tax. However, subsequent to September 30, 2009, the market price for Henry Hub gas and West Texas Intermediate oil increased significantly. As a consequence, prior to October 28, 2009, the Company elected to use prices on October 28, 2009, which were a WTI price of $77.20 per barrel and a Henry Hub spot market price of $4.51 per Mmbtu, adjusted for certain items as previously discussed. Utilizing these prices, the Company’s net book value of oil and natural gas properties at September 30, 2009, would not have exceeded the ceiling amount. As a result of the increase in the ceiling amount using the subsequent prices, the Company did not record a write-down of its oil and natural gas property costs. Changes in production rates, levels of reserves, future development costs, and other factors will determine the Company’s actual ceiling test calculation and impairment analyses in future periods.

At March 31, 2009 the ceiling test value of the Company’s reserves was calculated based on the March 31, 2009 WTI posted price of $49.66 per barrel, adjusted by lease for quality, transportation fees, and regional price differentials, and the March 31, 2009 Henry Hub spot market price of $3.63 per Mmbtu, adjusted by lease for energy content, transportation fees, and regional price differentials. Using these prices, the Company’s net book value of oil and natural gas properties exceeded the ceiling amount by approximately $1.7 billion before tax, $1.1 billion after tax. Accordingly, the Company recorded an approximate $1.7 billion full cost ceiling impairment at March 31, 2009, before tax.

At December 31, 2008, the ceiling test value of the Company’s reserves was calculated based on the December 31, 2008 WTI posted price of $41.00 per barrel, adjusted by lease for quality, transportation fees, and regional price differentials, and the December 31, 2008, Henry Hub spot market price of $5.71 per Mmbtu, adjusted by lease for energy content, transportation fees, and regional price differentials. At December 31, 2008, the Company’s net book value of oil and natural gas properties exceeded the ceiling amount by approximately $1.0 billion before tax, and $574 million after tax. Accordingly, the Company recorded approximately $1.0 billion in full cost ceiling impairments at December 31, 2008, before tax.

Southwestern Energy Co

(2) GAS AND OIL PROPERTIES

The Company utilizes the full cost method of accounting for costs related to the exploration, development, and acquisition of natural gas and oil reserves. Under this method, all such costs (productive and nonproductive), including salaries, benefits and other internal costs directly attributable to these activities are capitalized and amortized on an aggregate basis over the estimated lives of the properties using the units-of-production method. These capitalized costs, less accumulated amortization and related deferred income taxes, are subject to a ceiling test that limits such pooled costs to the aggregate of the present value of future net revenues attributable to proved natural gas and oil reserves discounted at 10 percent (standardized measure) plus the lower of cost or market value of unproved properties. Any costs in excess of the ceiling are written off as a non-cash expense. The expense may not be reversed in future periods, even though higher natural gas and oil prices may subsequently increase the ceiling. Full cost companies must use the prices in effect at the end of each accounting quarter, including the impact of derivatives qualifying as hedges, to calculate the ceiling value of their reserves. However, commodity price increases subsequent to the end of a reporting period but prior to the release of a periodic report may be utilized to calculate the ceiling value of reserves.

At March 31, 2009, the net capitalized costs of our gas and oil properties exceeded the ceiling by approximately $558.3 million (net of tax) and resulted in a non-cash ceiling test impairment in the first quarter of 2009. Using the quoted market price for Henry Hub natural gas on October 23, 2009 of $4.98 per MMBtu and $77.75 per barrel for West Texas Intermediate oil, adjusted for market differentials, the Company’s net book value of natural gas and oil properties did not exceed the ceiling amount and did not result in a ceiling test impairment in the third quarter. The ceiling value of the Company’s reserves based upon quoted market prices at September 30, 2009 of $3.30 per MMBtu for Henry Hub natural gas and $67.00 per barrel for West Texas Intermediate oil, adjusted for market differentials, would have exceeded the ceiling amount by $228.3 million (net of taxes), including the effect of hedges. Cash flow hedges of gas production in place increased the ceiling value by approximately $347.7 million and $208.2 million at September 30, 2009 and October 23, 2009, respectively. Decreases in market prices as well as changes in production rates, levels of reserves, evaluation of costs excluded from amortization, future development costs and service costs could result in future ceiling test impairments.