BP 2007 Annual Report Download - page 174

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Additional information for US reporting
BP has taken advantage of the SEC ruling of 15 November 2007 that eliminated the requirement to provide a reconciliation from IFRS to US GAAP.
The notes below are included to meet ongoing US reporting obligations.
48 Suspended exploration well costs
Included within the total exploration expenditure of $5,252 million (2006 $4,110 million and 2005 $4,008 million) shown as part of intangible assets
(see Note 25) is an amount of $2,342 million (2006 $1,863 million and 2005 $1,931 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 per 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: (i) that exploration drilling is still under way or firmly planned, or (ii) that it has been determined, or
work is under way 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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2007 2006 2005
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Capitalized exploration well costs
At 1 January 1,863 1,931 1,680
Additions pending determination of proved reserves 773 590 565
Exploration well costs written off in the year (94) (168) (81)
Costs of exploration wells divested in the year (27) (36) (72)
Reclassified to tangible assets following determination of proved reserves (173) (251) (161)
Reclassified to investment in jointly controlled entity –(203) –
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At 31 December 2,342 1,863 1,931
The following table provides an ageing profile of suspended exploration wells.
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At 31 December 2007 2006 2005
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Cost Wells Cost Wells Cost Wells
$million gross $ million gross $ million gross
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Age
Less than 1 year 761 35 611 45 593 46
1 to 5 years 1,081 73 736 64 823 69
6to10years 224 30 267 37 309 42
More than 10 years 276 35 249 26 206 20
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Total 2,342 173 1,863 172 1,931 177
The following table provides an analysis of the amount of drilling costs directly associated with exploration wells.
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2007 2006 2005
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Cost Wells Cost Wells Cost Wells
$million gross Projects $ million gross Projects $ million gross Projects
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Exploration well costs
Projects with first capitalized exploration well
drilled in the 12 months ending
31 December 168 11 7 188 17 12 451 31 14
Other projects with recent or planned drilling
activity 1,502 92 24 894 86 21 718 65 20
Projects with completed exploration activity 672 70 27 781 69 27 762 81 28
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At 31 December 2,342 173 58 1,863 172 60 1,931 177 62
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 51 projects that have exploration well costs that have been capitalized for more than twelve
months as at 31 December 2007. Of these, there are 24 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
$672 million at 31 December 2007. Details of the activities being undertaken to progress these projects towards development are shown below.