Asset Retirement Obligations
|12 Months Ended|
Dec. 31, 2017
|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 table is a reconciliation of our ARO liability (in thousands):
During 2017, we decreased our ARO liability on an overall basis primarily due to plug and abandonment work performed during 2017, partially offset by increases from accretion and revisions of previous estimates. Revisions were primarily related to increased costs associated with wells at four fields that experienced sustained casing pressure issues. Wells that experience sustained casing pressure require more days and greater work scope to complete the abandonment project. Partially offsetting are downward revisions to cost estimates from service providers for plug and abandonment work at certain locations.
During 2016, we decreased our ARO liability 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 at our West Cameron fields identified while performing preliminary plug and abandonment work at these fields. In addition, increases were attributable to several non-operated properties under which we have no control. Partially offsetting are downward revisions to cost estimates from service providers for plug and abandonment work at certain locations.
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