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. If proven reserves of oil or natural gas are determined and development is sanctioned, the relevant expenditure is transferred to machinery and technical 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

 

2012

2011

1

Only fully consolidated companies

As of January 1

314

254

Additions pending determination of proven reserves

277

120

Capitalized exploratory well costs charged to expense

(75)

(26)

Reclassifications to wells, facilities and equipment

(30)

(34)

As of December 31

486

314

The following table provides an aging of capitalized well costs, the amounts capitalized and, on the last line, the number of suspended exploration wells.

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Capitalized exploration well-drilling costs (million €) 1

 

2012

2011

1

Only fully consolidated companies

Wells for which drilling is not complete

172

33

Wells capitalized less than one year

78

63

Wells capitalized more than one year

236

218

Total

486

314

 

 

 

Number of suspended wells

40

32