Capitalized Exploratory Well Costs

We capitalize exploratory well costs until a determination is made that the well has found proved reserves or is deemed noncommercial. If a well is deemed to be noncommercial, the well costs are immediately charged to exploration expense as dry hole cost.

Changes in capitalized exploratory well costs are as follows and exclude amounts that were capitalized and subsequently expensed in the same period:



	Six Months Ended June 30, 2012
(millions)
Capitalized Exploratory Well Costs, Beginning of Period	$	696
Additions to Capitalized Exploratory Well Costs Pending Determination of Proved Reserves	160
Reclassified to Proved Oil and Gas Properties Based on Determination of Proved Reserves	(9		)
Capitalized Exploratory Well Costs Charged to Expense ⁽¹⁾	(107		)
Other ⁽²⁾	(19		)
Capitalized Exploratory Well Costs, End of Period	$	721

⁽¹⁾ Amount primarily represents the Deep Blue exploratory well (deepwater Gulf of Mexico) costs capitalized prior to December 31, 2011. Although hydrocarbons were found in both the initial exploration well and subsequent sidetrack, we and our partners have decided not to proceed with additional appraisal activities at this time.

⁽²⁾ Amount represents the Selkirk exploratory well (North Sea) which, along with our remaining North Sea assets, was reclassified to held for sale at June 30, 2012. See Note 3. Acquisitions and Divestitures.

The following table provides an aging of capitalized exploratory well costs based on the date that drilling commenced, and the number of projects that have been capitalized for a period greater than one year:



	June 30, 2012		December 31, 2011
(millions)
Exploratory Well Costs Capitalized for a Period of One Year or Less	$	330	$	318
Exploratory Well Costs Capitalized for a Period Greater Than One Year Since Commencement of Drilling	391		378
Balance at End of Period	$	721	$	696
Number of Projects with Exploratory Well Costs That Have Been Capitalized for a Period Greater Than One Year Since Commencement of Drilling	8		9

The following table provides a further aging of those exploratory well costs that have been capitalized for a period greater than one year since the commencement of drilling as of June 30, 2012:



			Suspended Since
	Total		2011		2010		2009 & Prior
(millions)
Country/Project:
Offshore Equatorial Guinea
Blocks O and I	$	155	$	43	$	6	$	106
Offshore Cameroon
YoYo	44		4		2		38
Offshore Israel
Leviathan	62		21		41		—
Leviathan-1 Deep	27		27		—		—
Dalit	22		—		1		21
Deepwater Gulf of Mexico
Gunflint	68		9		3		56
Other
2 projects of $10 million or less each	13		7		6		—
Total	$	391	$	111	$	59	$	221

Blocks O and I Blocks O and I are crude oil, natural gas and natural gas condensate discoveries. During 2011, we drilled the successful Diega appraisal well which encountered both crude oil and natural gas. We have drilled two sidetracks, each of which encountered hydrocarbons. We are currently evaluating regional development scenarios that will include Diega, along with the successful Carla appraisal well, which was drilled in the fourth quarter of 2011.

YoYo YoYo is a 2007 natural gas and condensate discovery. During 2011 we acquired and processed additional 3-D seismic information and are continuing evaluations for future drilling potential.

Leviathan Leviathan is a 2010 natural gas discovery. We are continuing to evaluate the discovery with the successful drilling of the Leviathan-3 appraisal well and will require an additional one or two appraisal wells to further define Leviathan’s natural gas areal extent. We have project and commercial teams in place and are considering our natural gas commercialization options. Due to the scale of the discovery, economic viability depends on the ability to export via pipeline or LNG. Each of these development options would require a multi-billion dollar investment and require a number of years to complete. Engineering design and planning work are currently underway for a potential first phase of development. In addition, we are working with our existing partners to identify a potential partner who can provide technical and financial support as well as midstream and downstream expertise.

Leviathan-1 Deep In January 2012, we resumed drilling at the Leviathan-1 well in order to evaluate two deeper intervals for the existence of crude oil (Leviathan-1 Deep). In May 2012, due to high well pressure and the mechanical limits of the wellbore design, we suspended drilling operations. Although the well did not reach the planned objective, we are encouraged by the possibility of an active thermogenic (heat producing) petroleum system at greater depths within the basin. We are continuing our evaluation of Leviathan-1 Deep and will integrate the data from the Leviathan-1 Deep well into our model to update our analysis and design a drilling plan specifically to test the deep oil concept. Part of the plan will be to secure a rig with the capabilities necessary to reach the target objective.

Dalit Dalit is a 2009 natural gas discovery. We are currently working with our partners on a cost-effective development plan.

Gunflint Gunflint (Mississippi Canyon Block 948) is a 2008 crude oil discovery. In July 2012, we reached target depth on our Gunflint appraisal well and are currently evaluating the drilling results. Additional appraisal locations are currently being evaluated. Front-end conceptual studies have been completed, and we are working toward sanctioning of a scalable development project.