Asset Retirement Obligations

9 Months Ended

Sep. 30, 2022

Asset Retirement Obligation Disclosure [Abstract]

Asset Retirement Obligations

Note 12 — Asset Retirement Obligations

Asset retirement obligations (“AROs”) are recorded at fair value and consist of estimated costs for subsea infrastructure decommissioning and P&A activities associated with our oil and gas properties. 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.

Our existing AROs relate to our Droshky oil and gas properties that we acquired from Marathon Oil Corporation (“Marathon Oil”) in January 2019. In connection with assuming the P&A obligations related to those assets, we are entitled to receive agreed-upon amounts from Marathon Oil as the P&A work is completed. Our ARO additions in the third quarter 2022 and a corresponding asset of $23.6 million relate to MP GOM’s 62.5% interest in the Thunder Hawk Field that we acquired in August 2022 (Note 2). The following table describes the changes in our AROs (in thousands):

	2022		2021
AROs at January 1,	$	29,658	$	30,913
Liability incurred during the period		23,601		—
Revisions in estimates		—		(2,631)
Accretion expense		1,465		736
AROs at September 30,	$	54,724	$	29,018