Asset Retirement Obligations

9 Months Ended

Sep. 30, 2011

Asset Retirement Obligation Disclosure [Abstract]

Note 9 - Asset Retirement Obligations

Asset retirement obligations associated with retiring tangible long-lived assets are recognized as a liability in the period in which a legal obligation is incurred and becomes determinable and are included in "other noncurrent liabilities" on the condensed consolidated balance sheets. Accretion expense is included in "depreciation, depletion and amortization" on the condensed consolidated statements of operations. The fair value of additions to the asset retirement obligations is estimated using valuation techniques that convert future cash flows to a single discounted amount. Significant inputs to the valuation include estimates of: (i) plug and abandon costs per well based on existing regulatory requirements; (ii) remaining life per well; (iii) future inflation factors (2.0% for the nine months ended September 30, 2011); and (iv) a credit-adjusted risk-free interest rate (average of 7.5% for the nine months ended September 30, 2011).

The following presents a reconciliation of the asset retirement obligations (in thousands):

Asset retirement obligations at December 31, 2010	$	42,945
Liabilities added from acquisitions		6,966
Liabilities added from drilling		917
Current year accretion expense		2,816
Settlements		(1,214	)
Revision of estimate		787
Asset retirement obligations at September 30, 2011	$	53,217