Asset Retirement Obligations

9 Months Ended

Sep. 30, 2014

Asset Retirement Obligation Disclosure [Abstract]

Asset Retirement Obligations

6. Asset Retirement Obligations

The Company’s asset retirement obligations primarily represent the estimated fair value of the amounts that will be incurred to plug, abandon and remediate our producing properties at the end of their productive lives. Significant inputs used in determining such obligations include, but are not limited to, estimates of plugging and abandonment costs, estimated future inflation rates and changes in property lives. The inputs are calculated based on historical data as well as current estimated costs.

On a quarterly basis, the Company reviews the assumptions used to estimate the expected cash flows required to settle the asset retirement obligations, including changes in estimated probabilities, amounts and timing of the settlement of the asset retirement obligations, as well as changes in the legal obligation for each of its properties. Changes in any one or more of these assumptions may cause revisions in the estimated liabilities for the corresponding assets.

In September 2014, the Company determined that, based on the current operating plan and the equipment to be utilized, its estimated costs to plug and abandon certain wells should be revised upwards by a net amount of $15.1 million.  

The following summarizes changes in the Company’s asset retirement obligations during the period (In thousands):

	2014
Asset retirement obligations at January 1	$	20,601
Accretion expense		1,349
Revisions in estimated liabilities		15,050
Asset retirement obligations at September 30	$	37,000

The table below shows the current and long-term portions of the Company's asset retirement obligations during the period (In thousands):

	2014
Asset retirement obligations, current portion	$	23,086
Asset retirement obligations, long-term portion		13,914
	$	37,000

Accretion expense is recognized as a component of depreciation, depletion and amortization expense in the accompanying statements of operations.