Capitalized exploration drilling: Suspended well costs
Exploratory drilling costs are capitalized until the drilling of the well is complete. If hydrocarbon reserves are found whose commercial development is likely, the costs continue to be capitalized as construction in progress, subject to further appraisal activity that may include the drilling of further wells. All such capitalized costs are subject to technical and commercial review by the management at least once a year to confirm the continued intent to develop or otherwise extract value from the discovery. If 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 expenses are transferred within property, plant and equipment to machinery and technical equipment. Impairments for unsuccessful exploration wells are recognized in exploration expenses.
The following table indicates the changes to the capitalized costs of exploration drilling.
Capitalized exploration drilling1 (in million €) |
|||||
|
|
2015 |
2014 |
||
---|---|---|---|---|---|
|
|||||
As of January 1 |
|
433 |
532 |
||
Additions to exploration drilling of the year |
|
247 |
152 |
||
Capitalized exploration drilling charged to expense |
|
(145) |
(203) |
||
Reclassification to successful exploration drilling |
|
(121) |
(48) |
||
Change in scope of consolidation |
|
(108) |
– |
||
As of December 31 |
|
306 |
433 |
The following table provides an overview of the capitalization period, amounts capitalized for exploration drilling, and the number of suspended exploration wells.
Capitalized exploration drilling1 (in million €) |
|||||
|
|
2015 |
2014 |
||
---|---|---|---|---|---|
|
|||||
Wells for which drilling is not complete |
|
198 |
135 |
||
Wells capitalized less than one year |
|
32 |
48 |
||
Wells capitalized more than one year |
|
76 |
250 |
||
Total |
|
306 |
433 |
||
Number of suspended wells |
|
34 |
41 |