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Last Update: 03/12/2009
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Capitalized exploration well-drilling costs: suspended well costs

Exploratory drilling costs are capitalized until the drilling of the well is complete. If hydrocarbons are found, and, subject to further appraisal activity which may include the drilling of further wells, are likely to be capable of commercial development, the costs continue to be carried as an asset. All such carried costs are subject to technical, commercial and management review at least once a year to confirm the continued intent to develop or otherwise extract value from the discovery. When this is no longer the case, the costs are written off. When proved reserves of oil or natural gas are determined and development is sanctioned, the relevant expenditure is transferred to property, plant and equipment. Unsuccessful exploration wells are impaired in exploration expenses.

The following table indicates the changes to the company’s capitalized exploration well-drilling costs.

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Capitalized exploration well-drilling costs (million €)1

 

 

2008

2007

1

Only consolidated companies

At January 1

75.3

86.3

Additions pending determination of proved reserves

118.4

71.6

Capitalized exploratory well costs charged to expense

(60.1)

(51.0)

Reclassifications to wells, facilities and equipment

(42.5)

(31.6)

Ending balance at December 31

91.1

75.3

The following table provides an aging of capitalized well costs (million €) and, on the last line, the number of suspend exploration wells.

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Capitalized exploration well-drilling costs (million €)1

 

 

2008

2007

1

Only consolidated companies

Wells for which drilling is not complete

25.8

13.8

Wells capitalized less than one year

30.6

36.8

Wells capitalized more than one year

34.7

24.8

Total

91.1

75.3

 

 

 

Number of wells

13

15

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