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Asset Retirement Obligations
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9 Months Ended | ||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2015
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| Asset Retirement Obligation Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||
| Asset Retirement Obligations |
Note 6 - Asset Retirement Obligations
The estimated valuation of asset retirement obligations ("AROs") is based on the Company's historical experience and management's best estimate of plugging and abandonment costs by field. Assumptions and judgments made by management when assessing an ARO include: (i) the existence of a legal obligation; (ii) estimated probabilities, amounts, and timing of settlements; (iii) the credit-adjusted risk-free rate to be used; and (iv) inflation rates. Accretion expense is recorded under depletion, depreciation, amortization, and accretion in the unaudited condensed consolidated statements of operations. If the recorded value of ARO requires revision, the revision is recorded to both the ARO and the asset retirement capitalized cost.
The following table summarizes the ARO activity for the nine months ended March 31, 2015:
In April 2015, the Company sold for nominal consideration its 40% interest in PEDL 126, the exploration license that contains the Markwells Wood-1 wellbore ("MW-1"). By selling the license and the wellbore, the Company will be able to eliminate as of June 30, 2015, $346 thousand of current asset retirement obligation liability related to MW-1 recorded on its balance sheet at March 31, 2015. Concomitantly, approximately $296 thousand of costs related to MW-1 included in wells in progress as of March 31, 2015 will be charged to operations during the three month period ending June 30, 2015.
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