Capitalized Exploration Drilling: Suspended Well Costs

Exploratory drilling costs are capitalized until the drilling of the well is complete. If hydrocarbon resources are found whose commercial development is possible, the costs continue to be capitalized as construction in progress, subject to further appraisal activity that may include the drilling of further wells. Management evaluates all such capitalized costs at least once a year from both a technical and economic perspective to confirm the continued intent to develop or otherwise extract value from the discovery. If this is no longer the case, the relevant costs are written off. If proven reserves of oil or natural gas are determined and development is sanctioned, however, 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 in capitalized exploration drilling.

The last row shows the year-end value for equity-accounted companies.

Capitalized exploration drilling (Million €)

Fully consolidated companies


2018

2017

As of January 1

 

303

411

Additions to exploration drilling of the year

 

46

32

Capitalized exploration drilling charged to expense

 

(25)

(34)

Reclassification of successful exploration drilling

 

(20)

(75)

Translation effect

 

7

(31)

As of December 31

 

311

303

Equity-accounted companies as of December 31

 

123

164

The following table provides an overview of the capitalization period, amounts capitalized for exploration drilling, and the number of suspended exploration wells.

Capitalized exploration drilling (Million €)

Fully consolidated companies


2018

2017

Wells for which drilling is not complete

 

10

4

Wells capitalized less than one year

 

32

35

Wells capitalized more than one year

 

269

264

Total

 

311

303

Number of exploration wells in construction in progress

 

29

31

Number of exploration wells in construction in progress at equity-accounted companies as of December 31

 

20

23