Asset Retirement Obligations

9 Months Ended

Sep. 30, 2024

Asset Retirement Obligation Disclosure [Abstract]

The company records the fair value of a liability for an asset retirement obligation (ARO) both as an asset and a liability when there is a legal obligation associated with the retirement of a tangible long-lived asset and the liability can be reasonably estimated. The legal obligation to perform the asset retirement activity is unconditional, even though uncertainty may exist about the timing and/or method of settlement that may be beyond the company’s control. This uncertainty about the timing and/or method of settlement is factored into the measurement of the liability when sufficient information exists to reasonably estimate fair value. The ARO liability is initially recognized at its fair value with a increase to the related asset. Subsequent accretion of the liability and depreciation of the asset is recorded over time. The company evaluates its ARO estimates regularly or when there is significant new information about costs, timing, and duration of asset retirement activity.

AROs are primarily recorded for the company’s crude oil and natural gas producing assets. No significant AROs associated with any legal obligations to retire downstream long-lived assets have been recognized, as indeterminate settlement dates for the asset retirements prevent estimation of the fair value of the associated ARO. The company performs periodic reviews of its downstream long-lived assets for any changes in facts and circumstances that might require recognition of a retirement obligation.

The following table indicates the changes to the company’s before-tax asset retirement obligations for the nine months ended September 30, 2024 and 2023:


	2024		2023
	(Millions of dollars)
Balance at January 1	$	13,833	$	12,701
Liabilities assumed in the PDC Energy, Inc. acquisition	—		220
Liabilities incurred	38		140
Liabilities settled	(1,803)		(1,124)
Accretion expense	441		457
Revisions in estimated cash flows	(63)		316
Balance at September 30	$	12,446	$	12,710

The long-term portion of the $12.4 billion balance at September 30, 2024 was $11.4 billion.