BP 2006 Annual Report Download - page 178

176
Additional information for US reporting
52 Suspended exploration well costs
Included within the total exploration expenditure of $4,110 million (2005 $4,008 million and 2004 $3,761 million) shown as part of intangible assets (see
Note 28) is an amount of $1,863 million (2005 $1,931 million and 2004 $1,680 million) representing costs directly associated with exploration wells.
The carried costs of exploration wells 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. In evaluating whether costs incurred meet the criteria for initial and continued
capitalization management uses two main criteria: (a) that exploration drilling is still under way or firmly planned, or (b) that it either has been
determined, or work is underway to determine, that the discovery is economically viable, based on a range of technical and commercial considerations,
and sufficient progress is being made on establishing development plans and timing.
The following table provides the year-end balances and movements for suspended exploration well costs.
$ million
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2006 2005 2004
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Capitalized exploration well costs
At 1 January 1,931 1,680 1,698
Additions pending determination of proved reserves 590 565 391
Exploration well costs written off in the year (168) (81) (84)
Costs of exploration wells divested in the year (36) (72) (34)
Reclassified to tangible assets following determination of proved reserves (251) (161) (291)
Reclassified to investment in jointly controlled entity (203) ––
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At 31 December 1,863 1,931 1,680
The following table provides an ageing profile of suspended exploration wells.
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At 31 December 2006 2005 2004
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Cost
$million
Wells
gross
Cost
$ million
Wells
gross
Cost
$ million
Wells
gross
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Age
Less than 1 year 611 45 593 46 411 26
1 to 5 years 736 64 823 69 787 81
6to10years 267 37 309 42 292 29
More than 10 years 249 26 206 20 190 18
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Total 1,863 172 1,931 177 1,680 154
The following table provides an analysis of the amount of costs directly associated with exploration wells.
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2006 2005 2004
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Cost
$million
Wells
gross Projects
Cost
$ million
Wells
gross Projects
Cost
$ million
Wells
gross Projects
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Exploration well costs
Projects with first capitalized exploration well
drilled in the 12 months ending 31 December 188 17 12 451 31 14 290 15 12
Other projects with recent or planned drilling
activity 894 86 21 718 65 20 400 36 13
Projects with completed exploration activity 781 69 27 762 81 28 990 103 41
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At 31 December 1,863 172 60 1,931 177 62 1,680 154 66
Exploration projects frequently involve the drilling of multiple wells over a number of years, and several discoveries may be grouped into a single
development project. The table above shows a total of 48 projects which have exploration well costs which have been capitalized for more than twelve
months as at 31 December 2006. Of these, there are 21 projects where exploratory wells have been drilled in the preceding 12 months or further
exploratory drilling is planned in the next year. Projects with completed exploration activity comprise a total of 27 projects, whose costs totalled
$781 million at 31 December 2006. Details of the activities being undertaken to progress these projects towards development are shown below.