5.	Asset Retirement Obligations

Asset retirement obligations primarily represent the estimated present value of the amounts to be incurred in future periods to plug, abandon and remediate our producing properties at the end of their productive lives.  The estimated present value of such obligations is determined using several assumptions and judgments about the ultimate settlement amounts, inflation factors, credit adjusted discount rates, timing of settlement, and changes in regulations.  Changes in estimates are reflected in the obligations as they occur.  If the fair value of a recorded asset retirement obligation changes, a revision is recorded to both the asset retirement obligation and the asset retirement capitalized cost.  For the purpose of determining the fair value of ARO incurred during the periods, the Company used the following assumptions:

			For the Six Months Ended February 28,
			2014		2013
Inflation rate			3.9 - 4.0%		3.9 - 4.0%
Estimated asset life			20.0 - 40.0 years		24.0 - 27.6 years
Credit adjusted risk free interest rate			8.0%		11.2%

The following table summarizes the change in asset retirement obligations for the six months ended February 28, 2014 (in thousands):

 

Asset retirement obligations, August 31, 2013		$	2,777
Liabilities incurred			428
Liabilities assumed			572
Liabilities settled			-
Accretion			156
Asset retirement obligations, February 28, 2014		$	3,933