6. Oil and Gas Properties

All of the Company's oil and gas properties are located in the PRC. Based on the determination of proved reserves, the Company classified $66.3 million of its unproved oil and gas properties to proved oil and gas properties. The Company has $1.9 million remaining in unproved oil and gas properties. The costs associated with our oil and gas properties include the following (in thousands):


		At December 31,
		2011			2010
Proved oil and gas properties	$	66,361		$	-

Unproved leasehold costs		275			275
Unproved oil and gas properties		1,624			49,819
Total unproved oil and gas properties		1,899			50,094
Accumulated depreciation, depletion and amortization		(744	)		-

Total oil and gas properties, net	$	67,516		$	50,094

Unproved Leasehold Costs. Unproved leasehold costs are composed of amounts we paid to the PRC's Ministry of Commerce of the People's Republic of China ("MofCom") and CUCBM pursuant to a PSC we entered into in 2002 with CUCBM to acquire the mineral rights in the Enhong and Laochang areas in the Yunnan Province.

Unproved Oil and Gas Properties. Unproved oil and gas property costs include only suspended well costs which are direct exploratory well costs pending determination of whether proved reserves have been discovered. Accounting guidance regarding capitalization of suspended well costs is provided by FASB ASC Topic 932. FASB ASC Topic 932 addresses whether there are circumstances under the successful efforts method of accounting for oil and gas producing activities that would permit the continued capitalization of exploratory well costs beyond one year, other than when additional exploration wells are necessary to justify major capital expenditures and those wells are under way or firmly planned for the near future. Capitalization of costs should be continued beyond one year in cases where reserves for the project are not yet proven, but the Company demonstrates sufficient continuing progress toward assessing those reserves. For the capitalized costs at December 31, 2011, our assessment indicated that our current work programs demonstrated our efforts in making sufficient continuing progress toward assessing the reserves in the areas for which the costs were incurred. Therefore, we have continued to capitalize these costs.

The following table reflects the net changes in capitalized exploratory well costs during 2011, 2010 and 2009 (in thousands):


		2011			2010		2009
Beginning balance at January 1	$	49,819		$	34,146	$	30,562
Additions to unevaluated exploratory
well costs pending the determination of proved reserves		18,166			15,673		3,584
Reclassifications of wells, facilities,
and equipment based on the determination of proved reserves		(66,361	)		-		-
Unevaluated exploratory well costs charged to expense		-			-		-
Ending balance at December 31	$	1,624		$	49,819	$	34,146

At December 31, 2011, the Company had costs of $1.1 capitalized for exploratory wells for a period of greater than one year after the completion of drilling.