Note 5 - Asset Retirement Obligation

3 Months Ended

Mar. 31, 2013

Asset Retirement Obligation Disclosure [Text Block]

5. ASSET RETIREMENT OBLIGATION

In general, the amount of an asset retirement obligation (“ARO”) and the costs capitalized will be equal to the estimated future cost to satisfy the abandonment obligation using current prices that are escalated by an assumed inflation factor up to the estimated settlement date, which is then discounted back to the date that the abandonment obligation was incurred using a credit-adjusted risk-free rate.

Activity related to the ARO liability for the three months ended March 31, 2013 is as follows (in thousands):

Liability for asset retirement obligation — December 31, 2012	$	37,508
Settlements		(130	)
Additions		20
Revisions		(150	)
Accretion expense		750
Liability for asset retirement obligation — March 31, 2013	$	37,998

The liability comprises a current balance of approximately $2.7 million and a noncurrent balance of approximately $35.3 million as of March 31, 2013.

Revisions to ARO reflect changes in abandonment cost estimates based on current information and consideration of the Company’s current plans.

- Definition

The entire disclosure for an asset retirement obligation and the associated long-lived asset. An asset retirement obligation is a legal obligation associated with the disposal or retirement from service of a tangible long-lived asset that results from the acquisition, construction or development, or the normal operations of a long-lived asset, except for certain obligations of lessees.

+ References+ Details

MILAGRO OIL & GAS, INC. 10-Q