Asset retirement obligation

12 Months Ended

Dec. 31, 2017

Notes to Financial Statements

8. Asset retirement obligation

Asset retirement obligations (“ARO”) relate to minor non-operated interests in oil and natural gas wells in which NXT has outstanding abandonment and reclamation obligations in accordance with government regulations. The Company’s obligation relates to its interests in 6 gross (1.2 net) wells. The estimated future abandonment liability is approximately $59,000 which is based on estimates of the future timing and costs to abandon, remediate and reclaim the well sites within the next five years. The net present value of the ARO is as noted below, and has been calculated using an inflation rate of 2.0% and discounted using a credit-adjusted risk-free interest rate of 1.6%.

	2017			2016		2015
ARO balance, beginning of the year	$	55,240		$	51,240	$	50,000
Accretion expense		2,283			4,000		1,800
Costs incurred		(821	)		-		(560	)
Change in ARO estimates		-			-		-
ARO balance, end of the year		56,702			55,240		51,240