Asset Retirement Obligations
|12 Months Ended|
Dec. 31, 2016
|Asset Retirement Obligation Disclosure [Abstract]|
|Asset Retirement Obligations||
4. Asset Retirement Obligations
Asset retirement obligations associated with the retirement of tangible long-lived assets are required to be recognized as a liability in the period in which a legal obligation is incurred and becomes determinable, with an offsetting increase in the carrying amount of the associated asset. The cost of the tangible asset, including the initially recognized ARO, is depleted such that the cost of the ARO is recognized over the useful life of the asset. The fair value of the ARO is measured using expected cash outflows associated with the ARO, discounted at our credit-adjusted risk-free rate when the liability is initially recorded. Accretion expense is recognized over time as the discounted liability is accreted to its expected settlement value.
The following is a reconciliation of our ARO liability (in thousands):
During 2016, we decreased our ARO on an overall basis primarily due to plug and abandonment work performed during 2016, partially offset by increases from accretion and revisions of previous estimates. Upward revisions were primarily related to sustained casing pressure issues for idle iron at our West Cameron fields identified while performing preliminary plug and abandonment work at these fields. In addition, increases were attributable to non-operated properties. Partially offsetting are downward revisions to cost estimates from service providers for plug and abandonment work at certain locations.
During 2015, we decreased our ARO on an overall basis primarily due to plug and abandonment work performed during 2015, partially offset by increases from accretion. Revisions were basically flat as some service providers reduced their costs of goods and services, some service provider costs remained flat and some service provider costs estimates were increased, all of which were incorporated into our estimates. In addition, revisions were made for scope changes and on the estimates of timing of when the work will be performed. Liability increases from acquisitions and wells drilled were basically offset by reductions from dispositions.
The entire disclosure for an asset retirement obligation and the associated long-lived asset. An asset retirement obligation is a legal obligation associated with the disposal or retirement from service of a tangible long-lived asset that results from the acquisition, construction or development, or the normal operations of a long-lived asset, except for certain obligations of lessees.
Reference 1: http://www.xbrl.org/2003/role/presentationRef