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

1

Only fully consolidated companies

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

1

Only fully consolidated companies

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