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Asset Retirement Obligations

9 Months Ended

Sep. 30, 2012

6. Asset Retirement Obligations

ARO’s represent the future abandonment costs of tangible assets, such as wells, service assets and other facilities. The fair value of the ARO at inception is capitalized as part of the carrying amount of the related long-lived assets. ARO’s approximated $11.8 million and $7.6 million as of September 30, 2012 and December 31, 2011, respectively.

The liability has been accreted to its present value as of September 30, 2012 and December 31, 2011. The Company evaluated its wells and determined a range of abandonment dates through 2058.

The following table reflects the changes in the Company’s ARO’s for the nine months ended September 30, 2012 (in thousands):

Asset retirement obligations at January 1, 2012	$	7,627
Liabilities incurred	2,525
Revisions	1,189
Liabilities settled	—
Current period accretion expense	463
Asset retirement obligations at September 30, 2012	$	11,804

- Definition

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.

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