Property, Plant and Equipment

9 Months Ended

Sep. 30, 2015

Property, Plant And Equipment [Abstract]

Property, Plant and Equipment

Note B – Property, Plant and Equipment

During the third quarter 2015, declines in future oil and gas prices provided indications of possible impairments in certain of the Company’s producing properties.  As a result of management’s assessments, during the third quarter of 2015, the Company recognized a pretax noncash impairment charge of approximately $2,301.0 million to reduce the carrying value of certain producing properties in the Gulf of Mexico, Western Canada and Malaysia to their estimated fair value.  The fair values were determined by internal discounted cash flow models using estimates of future production, prices from futures exchanges, costs, and a discount rate believed to be consistent with those used by principal market participants in the applicable region.  The following table reflects the recognized impairments for the three-month and nine-month periods of 2015.

	Three Months and Nine Months Ended
	September 30, 2015
(Thousands of dollars)		Impairment Expense	Net of Taxes
Gulf of Mexico	$	144,800	94,120
Western Canada – Heavy Oil		683,574	495,591
Malaysia		1,472,600	946,773
	$	2,300,974	1,536,484

Under U.S. generally accepted accounting principles for companies that use the successful efforts method of accounting, exploratory well costs should continue to be capitalized when the well has found a sufficient quantity of reserves to justify its completion as a producing well and the company is making sufficient progress assessing the reserves and the economic and operating viability of the project.

At September 30, 2015, the Company had total capitalized exploratory well costs pending the determination of proved reserves of 209.7 million.  The following table reflects the net changes in capitalized exploratory well costs during the nine-month periods ended September 30, 2015 and 2014.

(Thousands of dollars)	2015		2014
Beginning balance at January 1	$	120,455	393,030
Additions pending the determination of proved reserves		89,197	13,595
Balance at September 30	$	209,652	406,625

Note B – Property, Plant and Equipment (Contd.)

The following table provides an aging of capitalized exploratory well costs based on the date the drilling was completed for each individual well and the number of projects for which exploratory well costs have been capitalized.  The projects are aged based on the last well drilled in the project.

		September 30,
	2015				2014
(Thousands of dollars)	Amount		No. of Wells	No. of Projects	Amount		No. of Wells	No. of Projects
Aging of capitalized well costs:
Zero to one year	$	52,249	5	3	$	32,192	2	1
One to two years		32,192	2	1		36,676	2	1
Two to three years		27,842	2	–		51,898	6	–
Three years or more		97,369	4	2		285,859	22	7
	$	209,652	13	6	$	406,625	32	9

Of the $157.4 million of exploratory well costs capitalized more than one year at September 30, 2015, $91.5 million is in the U.S. and $65.9 million is in Brunei.  In both geographical areas, either further appraisal or development drilling is planned and/or development studies/plans are in various stages of completion.

During 2015, the Company completed the second phase of the sale of 30% of its oil and gas assets in Malaysia and received net cash proceeds of $417.2 million.  The Company recorded an after-tax gain of $218.8 million on the sale of the final 10% portion of the total 30% sold.  Combined net cash proceeds received to date from the 30% sale totaled $1.87 billion.

See also Note E for discussion regarding a capital lease of production equipment at the Kakap field.