Decommissioning Liabilities

9 Months Ended

Sep. 30, 2011

Decommissioning Liabilities [Abstract]

Decommissioning Liabilities

(11) Decommissioning Liabilities

In connection with the acquisition of the Bullwinkle platform and its related assets, the Company records estimated future decommissioning liabilities in accordance with the authoritative guidance related to asset retirement obligations (decommissioning liabilities), which requires entities to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred, with a corresponding increase in the carrying amount of the related long-lived asset. Subsequent to initial measurement, the decommissioning liability is required to be accreted each period to present value. The Company’s decommissioning liabilities associated with the Bullwinkle platform and its related assets consist of costs related to the plugging of wells, the removal of the related facilities and equipment, and site restoration.

Whenever practical, the Company utilizes its own equipment and labor services to perform well abandonment and decommissioning work. When the Company performs these services, all recorded intercompany revenues and related costs of services are eliminated in the consolidated financial statements. The recorded decommissioning liability associated with a specific property is fully extinguished when the property is abandoned. The recorded liability is first reduced by all cash expenses incurred to abandon and decommission the property. If the recorded liability exceeds (or is less than) the Company’s total costs, then the difference is reported as income (or loss) within revenue during the period in which the work is performed. The Company reviews the adequacy of its decommissioning liabilities whenever indicators suggest that the estimated cash flows needed to satisfy the liability have changed materially. The timing and amounts of these expenditures are estimates, and changes to these estimates may result in additional (or decreased) liabilities recorded, which in turn would increase (or decrease) the carrying values of the related assets. The Company reviews its estimates for the timing of these expenditures on a quarterly basis.

The following table summarizes the activity for the Company’s decommissioning liabilities for the nine month periods ended September 30, 2011 and 2010 (in thousands):

	Nine Months Ended
	September 30,
	2011			2010
Decommissioning liabilities, December 31, 2010 and 2009, respectively	$	117,716		$	—
Liabilities acquired and incurred		—			136,559
Accretion		5,038			5,361
Revision in estimated liabilities		(292	)		—
Total decommissioning liabilities, September 30, 2011 and 2010, respectively		122,462			141,920
Less: current portion of decommissioning liabilities at September 30, 2011 and 2010, respectively		17,090			25,804
Long-term decommissioning liabilities, September 30, 2011 and 2010, respectively	$	105,372		$	116,116