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ASSET RETIREMENT OBLIGATIONS
 3 Months Ended
Mar. 31, 2023
Asset Retirement Obligation Disclosure [Abstract]  
ASSET RETIREMENT OBLIGATIONS

10. ASSET RETIREMENT OBLIGATIONS

 

The Company has asset retirement obligations (“AROs”) associated with the future plugging and abandonment of proved properties. Initially, the fair value of a liability for an ARO is recorded in the period in which the ARO is incurred with a corresponding increase in the carrying amount of the related asset. The liability is accreted to its present value each period and the capitalized cost is depleted over the life of the related asset. If the liability is settled for an amount other than the recorded amount, an adjustment to the full-cost pool is recognized. The Company had no assets that are restricted for the purpose of settling AROs.

 

The Company recorded $9.6 million of ARO related to the assets acquired in the January 5, 2022 acquisition, $0.5 million of ARO related to the assets acquired in the May 3, 2022 acquisition of Liberty County, Texas assets and $1.7 million of ARO related to the assets acquired in the July 27, 2022 acquisition. See Note 2- Acquisitions.

 

In the fair value calculation for the ARO there are numerous assumptions and judgments, including the ultimate retirement cost, inflation factors, credit-adjusted risk-free discount rates, timing of retirement and changes in legal, regulatory, environmental, and political environments. To the extent future revisions to assumptions and judgments impact the present value of the existing ARO, a corresponding adjustment is made to the oil and natural gas property balance.

 

The following is a reconciliation of the changes in the Company’s liabilities for asset retirement obligations as of March 31, 2023 and December 31, 2022:

 

  

March 31, 2023

   December 31, 2022 
   (in thousands) 
Balance, beginning of year  $15,442   $1,461 
Acquired   11    11,811 
Cost and life revisions   41   1,825 
Plugged   (11)   (407)
Sold   -    (189)
Accretion   265    941 
Balance, end of period  $15,748   $15,442