Decommissioning and Other Asset Retirement Obligations

12 Months Ended

Dec. 31, 2012

Notes to Financial Statements [Abstract]

Decommissioning and Other Asset Retirement Obligations

NOTE I - DECOMMISSIONING AND OTHER ASSET RETIREMENT OBLIGATIONS

The large majority of our asset retirement obligations consists of the remaining future well abandonment and decommissioning costs for offshore oil and gas properties and platforms owned by our Maritech subsidiary, including the decommissioning and debris removal costs associated with two remaining offshore platforms previously destroyed by hurricanes. The amount of decommissioning liabilities recorded by Maritech is reduced by amounts allocable to joint interest owners and any contractual amounts to be paid by the previous owners of the oil and gas properties when the liabilities are satisfied. We also operate facilities in various U.S. and foreign locations that are used in the manufacture, storage, and sale of our products, inventories, and equipment. These facilities are a combination of owned and leased assets. We are required to take certain actions in connection with the retirement of these assets. We have reviewed our obligations in this regard in detail and estimated the cost of these actions. These estimates are the fair values that have been recorded for retiring these long-lived assets. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset. The costs for non-oil and gas assets are depreciated on a straight-line basis over the life of the asset.

The changes in the asset retirement obligations during the most recent two year period are

as follows:

	Year Ended December 31,
	2012		2011
	(In Thousands)
Beginning balance for the period, as reported	$	139,835		$	272,815
Activity in the period:
Accretion of liability		1,536			4,325
Retirement obligations incurred		-			-
Revisions in estimated cash flows		40,986			79,360
Settlement of retirement obligations		(87,436)			(216,665)
Ending balance	$	94,921		$	139,835

We review the adequacy of our decommissioning liabilities whenever indicators suggest that the estimated cash flows underlying the liabilities have changed materially. For our Maritech segment, the timing and amounts of these cash flows are subject to changes in the energy industry environment and other factors and may result in additional liabilities to be recorded. During 2012, we increased the estimated cash flows to decommission these properties by approximately $41.0 million, which resulted in approximately $40.8 million of direct charges to expense during the year. These increased estimates are included in the revisions in estimated cash flows in the table above. A portion of the excess decommissioning costs recorded during 2012 and 2011 was associated with properties not operated by Maritech. Specific factors that caused Maritech's decommissioning liabilities to increase during 2012 and 2011 included:

• certain properties that had been previously abandoned required additional work to relieve pressure on wells and to remove structural debris not previously known;
• due to our continued extensive abandonment program begun in prior years, we were able to further refine our estimates for certain properties with similar characteristics and risk profiles to those recently abandoned; and
• two platforms destroyed by hurricanes during 2005 were found to be more extensively damaged than previously estimated, which caused us to add additional costs for removing these downed structures.

Our estimate of remaining hurricane related decommissioning costs is approximately $13.9 million and has been accrued as part of Maritech's decommissioning liabilities. Settlements of asset retirement obligations during 2011 include approximately $122.0 million of obligations associated with oil and gas properties that were sold by Maritech during the year.