ASSET RETIREMENT OBLIGATION

6 Months Ended

Jun. 30, 2013

ASSET RETIREMENT OBLIGATION

ASSET RETIREMENT OBLIGATION

NOTE F—ASSET RETIREMENT OBLIGATION

The estimated fair value of the future costs associated with dismantlement, abandonment and restoration of oil and gas properties is recorded generally upon acquisition or completion of a well. The net estimated costs are discounted to present values using a risk adjusted rate over the estimated economic life of the oil and gas properties. Such costs are capitalized as part of the related asset. The asset is depleted on the units-of-production method. The associated liability is classified in other long-term liabilities, net of current portion, in the accompanying Consolidated Balance Sheets. The liability is periodically adjusted to reflect (1) new liabilities incurred, (2) liabilities settled during the period, (3) accretion expense, and (4) revisions to estimated future cash flow requirements. The accretion expense is recorded as a component of depreciation, depletion and amortization. The Company has cash held in escrow with a fair market value of $3.2 million that is legally restricted for potential plugging and abandonment liability in the Wilmington field which is recorded in other assets in the Consolidated Balance Sheets. A reconciliation of the Company’s asset retirement obligations is as follows:

	June 30,
	2013
	(in thousands)
Balance at beginning of period	$	25,236
Liabilities incurred in current period	395
Liabilities settled in current period	(1,194		)
Accretion expense	1,093
Balance at end of period	$	25,530