Note 6. Capitalized Exploratory Well Costs and Undeveloped Leasehold Costs

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:



	Year Ended December 31,
(millions)	2016			2015			2014
Capitalized Exploratory Well Costs, Beginning of Period	$	1,353		$	1,337		$	1,301
Additions to Capitalized Exploratory Well Costs Pending Determination of Proved Reserves	84			123			316
Divestitures and Other ⁽¹⁾	(143		)	—			—
Reclassified to Proved Oil and Gas Properties Based on Determination of Proved Reserves or to Assets Held for Sale ⁽²⁾	(1		)	(19		)	(196		)
Capitalized Exploratory Well Costs Charged to Expense ⁽³⁾	(525		)	(88		)	(84		)
Capitalized Exploratory Well Costs, End of Period	$	768		$	1,353		$	1,337

⁽¹⁾ The 2016 amount relates to our farm-down of a 35% interest in Block 12 offshore Cyprus to a new partner.

⁽²⁾ The 2015 amount relates primarily to onshore US exploration activity.

The 2014 amount relates primarily to the Dantzler well (deepwater Gulf of Mexico), for which we sanctioned a development plan, and the Karish and Tanin wells (offshore Israel), which were reclassified to assets held for sale.

⁽³⁾ Capitalized exploratory well costs charged to expense are included within exploration expense in our consolidated statements of operations.

The 2016 amount relates primarily to discoveries offshore West Africa. Following review of additional 3D seismic data, we determined these discoveries were impaired in the current forward outlook for crude oil prices. We also incurred expenses associated with our Silvergate exploratory well in the deepwater Gulf of Mexico. The well did not encounter commercial hydrocarbons and has been plugged and abandoned.

The 2015 amount relates primarily to northeast Nevada. After assessing its commercial viability in the current commodity price environment, we elected to discontinue our exploration efforts.

The 2014 amount relates to non-strategic onshore US exploratory well costs and the Scotia exploratory well (offshore Falkland Islands) which were determined to be non-commercial.

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:



	December 31,
(millions)	2016		2015		2014
Exploratory Well Costs Capitalized for a Period of One Year or Less	$	69	$	95	$	247
Exploratory Well Costs Capitalized for a Period Greater Than One Year Since Commencement of Drilling	699		1,258		1,090
Balance at End of Period	$	768	$	1,353	$	1,337
Number of Projects with Exploratory Well Costs That Have Been Capitalized for a Period Greater Than One Year Since Commencement of Drilling	10		14		13

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 December 31, 2016:



			Suspended Since
Country/Project (millions)	Total		2014 - 2015			2012 - 2013			2011 & Prior		Progress
Deepwater Gulf of Mexico
Troubadour	52		5			47			—		Evaluating development scenarios for this 2013 natural gas discovery including subsea tieback to existing infrastructure.
Katmai	98		98			—			—		Evaluating development scenarios for this 2014 crude oil discovery. In second quarter 2016, drilling operations at the Katmai 2 appraisal well, located in Green Canyon Block 39, were temporarily abandoned as a result of encountering high pressure in the untested fault block. We are assessing plans to progress appraisal and are evaluating tie-back options.
Offshore Equatorial Guinea
Felicita (Block O)	45		7		—	9		—	29		Evaluating regional development scenarios for this 2008 gas discovery. During 2014, we conducted additional seismic activity over Blocks I and O and in early 2016, we began analyzing, interpreting and evaluating the acquired seismic data.
Yolanda (Block I)	22		3			5			14		A data exchange agreement for the 2007 Yolanda condensate and natural gas discovery has been executed between the governments of Equatorial Guinea and Cameroon. Our natural gas development team is working with the governments of Equatorial Guinea and Cameroon to evaluate natural gas monetization options for both Yolanda and YoYo (Cameroon) discoveries.
Offshore Cameroon
YoYo (YoYo Block)	54		6			13			35		A data exchange agreement for the 2007 YoYo condensate and natural gas discovery has been executed between the governments of Equatorial Guinea and Cameroon. Our natural gas development team is working with the governments of Equatorial Guinea and Cameroon to evaluate natural gas monetization options for both Yolanda (Equatorial Guinea) and YoYo discoveries.
Offshore Israel
Leviathan	199		18			77			104		Our development plan was approved by the Government of Israel and we are engaged in natural gas marketing activities to meet both Israeli domestic and regional export demands. We anticipate near-term project sanction and commencement of development activities.
Leviathan-1 Deep	85		7			51			27		The well did not reach the target interval in 2012. We are developing future drilling plans to test this deep oil concept, which is held by the Leviathan Development and Production Leases.
Dalit	31		4			7			20		Our development plan was approved by the Government of Israel to develop this 2009 natural gas discovery with a tie-in to existing infrastructure at Tamar.
Offshore Cyprus
Cyprus	89		12			54			23		During first quarter 2016, we received proceeds of $131 million from our 35% farm-down of interest with a partner in Block 12. In second quarter 2016, we submitted an updated development plan and continue to work with the Government of Cyprus to obtain approval of the development plan and the subsequent issuance of an Exploitation License. Receiving an Exploitation License will allow us and our partners to perform the necessary engineering and design studies and progress the project to final investment decision.
Other
Projects less than $20 million	24		23			—			1		Continuing to assess and evaluate wells.
Total	$	699	$	183		$	263		$	253

Undeveloped Leasehold Costs Undeveloped leasehold costs as of December 31, 2016 totaled $2.2 billion, including $2.1 billion related to onshore US unproved properties, $105 million related to deepwater Gulf of Mexico unproved properties, and $32 million related to international unproved properties.

We evaluate our exploration opportunities as part of our periodic impairment review. If, based upon a change in exploration plans, availability of capital and suitable rig and drilling equipment, resource potential, comparative economics, changing regulations and/or other factors, an impairment is indicated, we record either (1) impairment expense related to individually significant leases or (2) a decrease in the valuation of our pool of individually insignificant leases.

During 2016, we completed our geological evaluation of certain deepwater Gulf of Mexico and offshore Falkland Islands leases and licenses and determined that several, representing $127 million of undeveloped leasehold cost, should be relinquished or exited. As a result, we recognized $93 million of undeveloped leasehold impairment expense and recorded a $34 million decrease in our valuation pool of individually insignificant leases.