Asset Retirement Obligation

9 Months Ended

Sep. 30, 2018

Asset Retirement Obligation [Abstract]

Note 5 - Asset Retirement Obligation

Our asset retirement obligations (“ARO”) relate to future costs associated with the plugging and abandonment of oil and gas wells, removal of equipment and facilities from leased acreage and returning such land to its original condition. The fair value of a liability for an ARO is recorded in the period in which it is incurred or acquired, and the cost of such liability is recorded as an increase in the carrying amount of the related long-lived asset by the same amount. The liability is accreted each period and the capitalized cost is depleted on a units-of-production basis as part of the full cost pool. Revisions to estimated AROs result in adjustments to the related capitalized asset and corresponding liability.

The estimated ARO liability is based on estimated economic lives, estimates as to the cost to abandon the wells in the future, and federal and state regulatory requirements. The liability is discounted using a credit-adjusted risk-free rate estimated at the time the liability is incurred or acquired or increased as a result of a reassessment of expected cash flows and assumptions inherent in the estimation of the liability. Upward revisions to the liability could occur due to changes in estimated abandonment costs or well economic lives, or if federal or state regulators enact new requirements regarding the abandonment of wells. AROs are valued utilizing Level 3 fair value measurement inputs (see note 12).

The following table is a reconciliation of the ARO:

	Nine Months Ended September 30,
(in thousands)	2018			2017
Balance at beginning of period	$	7,737		$	5,120
Accretion expense		510			232
Additions from Carbon California Company, LLC		2,921			-
Additions from Seneca Acquisition		639			-
Additions from Liberty Acquisition		30			-
Additions during period		-			5
Obligations on sale of oil & gas properties		-			(93	)
		11,837			5,264
Less: ARO recognized as a current liability		(902	)		(144	)

Balance at end of period	$	10,935		$	5,120