Asset Retirement Obligations

6 Months Ended

Jun. 30, 2019

Asset Retirement Obligation Disclosure [Abstract]

Note 13 — Asset Retirement Obligations

Our asset retirement obligations (“AROs”) consist of estimated costs for subsea infrastructure P&A activities. The estimated costs are discounted to present value using a credit-adjusted risk-free discount rate. After its initial recognition, an ARO liability is increased for the passage of time as accretion expense, which is a component of our depreciation and amortization expense. An ARO liability may also change based on revisions in estimated costs and/or timing to settle the obligations.

The following table describes the changes in our AROs (both current and long-term) (in thousands):



AROs at January 1, 2019	$	—
Liability incurred during the period ⁽¹⁾	53,294
Liability settled during the period	(5,327		)
Accretion expense	1,118
AROs at June 30, 2019	$	49,085

(1)

In connection with the acquisition on January 18, 2019 of certain assets related to the Droshky Prospect (Note 2), we assumed the AROs for the required P&A of those assets in exchange for agreed-upon amounts to be paid by Marathon Oil as the P&A work is completed. We initially recognized $53.3 million of ARO liability, $50.8 million of receivables and $2.5 million of acquired property for this transaction.