Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurements

v2.4.0.6
Fair Value Measurements
 3 Months Ended
Sep. 30, 2012
Fair Value Disclosures [Abstract]  
Fair Value Measurements
Note 5 - Fair Value Measurements
The Company follows authoritative guidance related to fair value measurement and disclosure, which establishes a three level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy categorizes assets and liabilities measured at fair value into one of three different levels depending on the observability of the inputs employed in the measurement. The three levels are defined as follows:
•
Level 1: Quoted prices in active markets for identical assets – inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
•
Level 2: Significant other observable inputs – inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
•
Level 3: Significant unobservable inputs – inputs to the valuation methodology are unobservable and significant to the fair value measurement.
A financial instrument's categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The Company's assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. The Company’s policy is to recognize transfers in and/or out of a fair value hierarchy as of the end of the reporting period for which the event or change in circumstances caused the transfer. The Company has consistently applied the valuation techniques discussed for all periods presented. During the three months ended September 30, 2012, and 2011, there have been no transfers in and/or out of Level 1, Level 2, or Level 3.
Items required to be measured at fair value on a non-recurring basis include liabilities related to AROs. Items required to be measured at fair value on a recurring basis include cash and cash equivalents and securities available for sale, classified as Level 1, and the contingent consideration payable related to the acquisition of the non-controlling interest and additional working interest in Nautilus Poplar LLC, classified as Level 3.
As of September 30, 2012, the Company had $37.9 million in cash and cash equivalents, with $19.3 million held in cash and $18.6 million classified as cash equivalents. The cash equivalents were held in time deposit accounts in several Australian banks with maturities of 90 days or less.
The following table presents the amounts of assets and liabilities carried at fair value by the level in which they are classified within the valuation hierarchy for the three months ended:
 
September 30, 2012
 
Level 1
 
Level 2
 
Level 3
 
Total
 
(In thousands)
Assets
 
 
 
 
 
 
 
Cash and cash equivalents
$
37,939

 
$
—

 
$
—

 
$
37,939

Securities available for sale (1)
133

 
—

 
—

 
133

 
$
38,072

 
$
—

 
$
—

 
$
38,072

Liabilities
 
 
 
 
 
 
 
Contingent consideration payable
$
—

 
$
—

 
$
4,152

 
$
4,152

 
 
 
 
 
 
 
 
 
June 30, 2012
 
Level 1
 
Level 2
 
Level 3
 
Total
 
(In thousands)
Assets
 
 
 
 
 
 
 
Cash and cash equivalents
$
41,215

 
$
—

 
$
—

 
$
41,215

Securities available for sale (1)
155

 
—

 
—

 
155

 
$
41,370

 
$
—

 
$
—

 
$
41,370

Liabilities
 
 
 
 
 
 
 
Contingent consideration payable
$
—

 
$
—

 
$
4,072

 
$
4,072

(1) Included in the unaudited condensed consolidated balance sheets under prepaid and other assets.
The following table presents a roll forward of liabilities measured at fair value using significant unobservable inputs (Level 3) for the three months ended:
 
September 30,
2012
 
(In thousands)
June 30, 2012
$
4,072

Accretion of contingent consideration payable
80

September 30, 2012
$
4,152


The fair value of the contingent consideration payable is calculated using production projections and the estimated timing of production payouts. The Company also utilizes a discount that is consistent with the rate used in valuing its asset retirement obligations and reflective of the Company’s credit adjusted borrowing rate.