Property, Plant and Equipment

Oil and Natural Gas Properties. As of September 30, 2015 and December 31, 2014, we had approximately $9.1 billion and $8.7 billion of total property, plant, and equipment, net of accumulated depreciation, depletion and amortization on our balance sheet, substantially all of which related to both proved and unproved oil and natural gas properties. As of September 30, 2015, our capitalized costs related to proved properties by area were approximately $5 billion in Eagle Ford, $2 billion in Wolfcamp and $1 billion in Altamont. At September 30, 2015 and December 31, 2014, the costs associated with unproved oil and natural gas properties totaled approximately $0.5 billion and $0.7 billion, respectively. During the nine months ended September 30, 2015, we transferred approximately $0.2 billion from unproved properties to proved properties. For the quarters ended September 30, 2015 and 2014, we recorded $1 million and $4 million, respectively, of amortization of unproved leasehold costs in exploration expense in our consolidated income statement. For the nine months ended September 30, 2015 and 2014, we recorded $9 million and $15 million, respectively, of amortization of unproved leasehold costs in exploration expense in our consolidated income statement. Suspended well costs were not material as of September 30, 2015 or December 31, 2014.

Forward commodity prices play a significant role in determining impairments of proved or unproved property costs. Oil and natural gas prices are inherently volatile and decreased significantly during the latter part of 2014 and throughout 2015. For the quarter and nine months ended September 30, 2015, we did not record an impairment of our oil and natural gas properties, although the difference between the undiscounted cash flows and the carrying cost of those properties has narrowed significantly. Commodity prices have remained volatile subsequent to September 30, 2015 and have generally declined. Assuming forward commodity prices as of October 27, 2015, but holding all other factors constant as of September 30, 2015, we would not have experienced an impairment of our proved oil and natural gas properties. However, further price declines from these levels and/or changes to our future capital, production rates, levels of proved reserves and development plans as a consequence of the lower price environment, may result in an impairment of the carrying value of our proved and/or unproved properties in the future, and such charges could be significant.

Leasehold acquisition costs associated with non-producing areas are assessed for impairment based on our estimated drilling plans and capital expenditures relative to potential lease expirations. Our unproved property costs were approximately $0.5 billion at September 30, 2015, of which approximately $0.4 billion was associated with Wolfcamp and $0.1 billion with Altamont. Generally, economic recovery of unproved reserves in such areas is not yet supported by actual production or conclusive formation tests, but may be confirmed by our continuing exploration and development activities. Our allocation of capital to the development of unproved properties may be influenced by changes in commodity prices (e.g. the current low oil price environment), the availability of oilfield services and the relative returns of our unproved property development in comparison to the use of capital for other strategic objectives. We have drilling commitments on our Wolfcamp acreage that obligate us to drill a specified number of wells by March 31, 2018. Because of the current oil price environment, we reduced our expected capital expenditures in Wolfcamp in 2015 and in other operating areas where we have leasehold costs, and may continue to do so until prices return to more economic levels. Our ability to retain our leases and thus recover our non-producing leasehold costs will be dependent upon a number of factors including our levels of drilling activity, which may include drilling the acreage on our own behalf or jointly with partners, or our ability to modify or extend these leases. Currently, we believe we have the intent and ability to fulfill our drilling commitments prior to the expiration of the associated leases. Should oil prices not justify sufficient capital allocation to the continued development of properties where we have unproved property costs, we could incur impairment charges of our unproved property, and such charges could be material.

Asset Retirement Obligations. We have legal asset retirement obligations associated with the retirement of our oil and natural gas wells and related infrastructure. We settle these obligations when production on those wells is exhausted, when we no longer plan to use them or when we abandon them. We accrue these obligations when we can estimate the timing and amount of their settlement.

In estimating the liability associated with our asset retirement obligations, we utilize several assumptions, including a credit-adjusted risk-free rate primarily between 7-9 percent and a projected inflation rate of 2.5 percent. The net asset retirement liability as of September 30, 2015 on our consolidated balance sheet in other current and non-current liabilities and the changes in the net liability from January 1 through September 30, 2015 were as follows:



	2015
	(in millions)
Net asset retirement liability at January 1	$	42
Liabilities incurred	4
Liabilities settled	(2		)
Accretion expense	2
Changes in estimate	(6		)
Net asset retirement liability at September 30	$	40

Capitalized Interest. Interest expense is reflected in our financial statements net of capitalized interest. Capitalized interest for the quarter and nine months ended September 30, 2015 was approximately $3 million and $12 million, respectively. Capitalized interest for the quarter and nine months ended September 30, 2014 was approximately $6 million and $16 million, respectively.