Asset Retirement Obligation |
12 Months Ended | ||||||||||||||||||||||
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Dec. 31, 2023 | |||||||||||||||||||||||
| Asset Retirement Obligation [Abstract] | |||||||||||||||||||||||
| Asset Retirement Obligation |
Asset retirement obligations (“ARO”) relate to our obligation for the plugging and abandonment of oil and natural gas properties. The ARO is recorded at
fair value and accretion expense, recognized over the life of the property, increases the liability to its expected settlement value. Accretion expense is included within “Other” noninterest expense of the consolidated statements of comprehensive
income and consolidated statements of cash flows. If the fair value of the estimated ARO changes, an adjustment is recorded for both the ARO and the asset retirement cost.
The
following table is a reconciliation of changes in the Company’s asset retirement obligations for the periods ended December 31, 2023:
The fair value of the ARO is measured using expected future cash outflows discounted at the Company’s credit-adjusted risk-free interest rate. Fair
value, to the extent possible, includes a market risk premium for unforeseeable circumstances.
Inherent in the fair value calculation of the ARO are numerous assumptions and judgments including the ultimate settlement amounts, inflation factors,
credit adjusted discount rates, timing of settlement, and changes in the legal, regulatory, environmental, and political environments. To the extent future revisions to these assumptions impact the fair value of the existing ARO liability, a
corresponding adjustment is made to the oil and gas property balance.
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