ASSET RETIREMENT OBLIGATIONS

9 Months Ended

Sep. 30, 2018

8. ASSET RETIREMENT OBLIGATIONS

The Company records an asset retirement obligation (ARO) on oil and natural gas properties when it can reasonably estimate the fair value of an obligation to perform site reclamation, dismantle facilities or plug and abandon costs. For other operating property and equipment, the Company records an ARO when the system is placed in service and it can reasonably estimate the fair value of an obligation to perform site reclamation and other necessary work when it is required. The Company records the ARO liability on the unaudited condensed consolidated balance sheets and capitalizes a portion of the cost in “Oil and natural gas properties” or “Other operating property and equipment” during the period in which the obligation is incurred. The Company records the accretion of its ARO liabilities in “Depletion, depreciation and accretion” expense in the unaudited condensed consolidated statements of operations. The additional capitalized costs are depreciated on a unit-of-production basis or straight-line basis.

The Company recorded the following activity related to its ARO liability (in thousands, inclusive of the current portion):


Liability for asset retirement obligations as of December 31, 2017	$	4,368
Liabilities settled and divested		(110)
Additions		796
Acquisitions(1)		2,465
Accretion expense		225
Revisions in estimated cash flows		(632)
Liability for asset retirement obligations as of September 30, 2018	$	7,112

(1)

See Note 3, "Acquisitions and Divestitures," for additional information on the Company's acquisition and divestiture activities.