b'Revenue Recognition. We use the sales method of accounting for oil and gas revenues. Under thismethod, we recognize revenues on the volumes sold. The volumes sold may be more or less than thevolumes to which we are entitled based on our ownership interest in the property. These differencesresult in a condition known in the industry as a production imbalance. A receivable or liability isrecognized only to the extent that we have an imbalance on a specific property greater than theexpected remaining proved reserves on such property. As of December 31, 2018 and 2017, we had nooil and gas imbalances recorded in our consolidated financial statements.Our oil and gas revenues are based on provisional price contracts which contain an embeddedderivative that is required to be separated from the host contract for accounting purposes. The hostcontract is the receivable from oil sales at the spot price on the date of sale. The embedded derivative,which is not designated as a hedge for accounting purposes, is marked to market through oil and gasrevenue each period until the final settlement occurs, which generally is limited to the month after thesale occurs.Exploration and Development Costs. We follow the successful efforts method of accounting for ouroil and gas properties. Acquisition costs for proved and unproved properties are capitalized whenincurred. Costs of unproved properties are transferred to proved properties when a determination thatproved reserves have been found. Exploration costs, including geological and geophysical costs andcosts of carrying unproved properties, are charged to expense as incurred. Exploratory drilling costs arecapitalized when incurred. If exploratory wells are determined to be commercially unsuccessful or dryholes, the applicable costs are expensed. Costs incurred to drill and equip development wells, includingunsuccessful development wells, are capitalized. Costs incurred to operate and maintain wells andequipment and to lift crude oil and natural gas to the surface are expensed.Receivables. Our receivables consist of joint interest billings, oil sales and other receivables. Forour Ghana oil sales receivable, we require a letter of credit to be posted to secure the outstandingreceivable. Receivables from joint interest owners are stated at amounts due, net of any allowances fordoubtful accounts. We determine our allowance by considering the length of time past due, future netrevenues of the debtors ownership interest in oil and natural gas properties we operate, and theowners ability to pay its obligation, among other things.Income Taxes. We account for income taxes as required by the ASC 740Income Taxes(ASC 740). We make certain estimates and judgments in determining our income tax expense forfinancial reporting purposes. These estimates and judgments occur in the calculation of certain taxassets and liabilities that arise from differences in the timing and recognition of revenue and expensefor tax and financial reporting purposes. Our federal, state and international tax returns are generallynot prepared or filed before the consolidated financial statements are prepared; therefore, we estimatethe tax basis of our assets and liabilities at the end of each period as well as the effects of changes intax laws or tax rates, tax credits, and net operating loss carryforwards. Adjustments related to theseestimates are recorded in our tax provision in the period in which we file our income tax returns.Further, we must assess the likelihood that we will be able to realize or utilize our deferred tax assets.If realization is not more likely than not, we must record a valuation allowance against such deferredtax assets for the amount we would not expect to recover, which would result in no benefit for thedeferred tax amounts. As of December 31, 2018 and 2017, we have a valuation allowance to reducecertain deferred tax assets to amounts that are more likely than not to be realized. If our estimates andjudgments regarding our ability to realize our deferred tax assets change, the benefits associated withthose deferred tax assets may increase or decrease in the period our estimates and judgments change.On a quarterly basis, management evaluates the need for and adequacy of valuation allowances basedon the expected realizability of the deferred tax assets and adjusts the amount of such allowances, ifnecessary.97'