15.

Exploration and evaluation of oil and gas reserves

The exploration and evaluation activities include the search for oil and gas reserves from obtaining the legal rights to explore a specific area to the declaration of the technical and commercial viability of the reserves.

Changes in the balances of capitalized costs directly associated with exploratory wells pending determination of proved reserves and the balance of amounts paid for obtaining rights and concessions for exploration of oil and natural gas (capitalized acquisition costs) are set out in the following table:


Capitalized Exploratory Well Costs / Capitalized Acquisition Costs (*)	12.31.2018			12.31.2017
Property plant and equipment
Opening Balance		4,522			5,133
Additions to capitalized costs pending determination of proved reserves		379			797
Capitalized exploratory costs charged to expense		(10	)		(107	)
Transfers upon recognition of proved reserves		(95	)		(1,227	)
Cumulative translation adjustment		(664	)		(74	)

Closing Balance		4,132			4,522

Intangible Assets		1,980			1,390

Capitalized Exploratory Well Costs / Capitalized Acquisition Costs		6,112			5,912

(*)

Amounts capitalized and subsequently expensed in the same period have been excluded from this table.

For detailed information about signature bonus paid and declaration of commerciality in 2018, see note 13.

Exploration costs recognized in the statement of income and cash used in oil and gas exploration and evaluation activities are set out in the following table:


	2018		2017		2016
Exploration costs recognized in the statement of income
Geological and geophysical expenses		330		361		371
Exploration expenditures written off (includes dry wells and signature bonuses)		87		279		1,281
Contractual penalties		91		152		46
Other exploration expenses		16		8		63

Total expenses		524		800		1,761


Cash used in :	2018		2017		2016
Operating activities		346		371		435
Investment activities		1,273		1,794		1,075

Total cash used		1,619		2,165		1,510

For the year ended December 31, 2018, the Company recognized a provision in the amount of US$ 91 arising from potential contractual penalties for non-compliance with minimum percentages of local content in 131 blocks for which the exploratory phases were concluded.

15.1.

Aging of Capitalized Exploratory Well Costs

The following tables set out the amounts of exploratory well costs that have been capitalized for a period of one year or more after the completion of drilling, the number of projects whose costs have been capitalized for a period greater than one year, and an aging of those amounts by year (including the number of wells relating to those costs):


*Aging of capitalized exploratory well costs ()**	2018		2017
Exploratory well costs capitalized for a period of one year		85		111
Exploratory well costs capitalized for a period greater than one year		4,047		4,411

Total capitalized exploratory well costs		4,132		4,522

Number of projects relating to exploratory well costs capitalized for a period greater than one year		49		54

	Capitalized costs (2018)		Number of wells
2017		52		2
2016		288		4
2015		806		16
2014		1,041		16
2013 and previous years		1,860		36

Exploratory well costs that have been capitalized for a period greater than one year		4,047		74

(*)

Amounts paid for obtaining rights and concessions for exploration of oil and gas (capitalized acquisition costs) are not included.

Exploratory well costs that have been capitalized for a period greater than one year since the completion of drilling amount to US$ 4,047. Those costs relate to 49 projects comprising (i) US$3,834 for wells in areas in which there has been ongoing drilling or firmly planned drilling activities in the near term and for which an evaluation plan (“Plano de Avaliação”) has been submitted for approval by ANP; and (ii) US$213 relate to costs incurred to evaluate the reserves and their potential development.