Chevron 2007 Annual Report Download - page 76

74 
combination to recognize the assets acquired, the liabilities
assumed, and any noncontrolling interest in the acquiree at
the acquisition date to be measured at their respective fair
values. The Statement requires acquisition-related costs, as
well as restructuring costs the acquirer expects to incur for
which it is not obligated at acquisition date, to be recorded
against income rather than included in purchase-price
determination. It also requires recognition of contingent
arrangements at their acquisition-date fair values, with subse-
quent changes in fair value generally reflected in income.
FASB Statement No. 160, Noncontrolling Interests in Consoli-
dated Financial Statements, an amendment of ARB No. 51
(FAS 160) The FASB issued FAS 160 in December 2007,
which will become effective for the company January 1,
2009, with retroactive adoption of the Statement’s presen-
tation and disclosure requirements for existing minority
interests. This standard will require ownership interests
in subsidiaries held by parties other than the parent to be
presented within the equity section of the consolidated state-
ment of financial position but separate from the parent’s
equity. It will also require the amount of consolidated net
income attributable to the parent and the noncontrolling
interest to be clearly identified and presented on the face of
the consolidated income statement. Certain changes in a
parent’s ownership interest are to be accounted for as equity
transactions and when a subsidiary is deconsolidated, any
noncontrolling equity investment in the former subsidiary is
to be initially measured at fair value. The company does not
anticipate the implementation of FAS 160 will significantly
change the presentation of its consolidated income statement
or consolidated balance sheet.


The company accounts for the cost of exploratory wells in
accordance with FASB Statement No. 19, Financial and Report-
ing by Oil and Gas Producing Companies (FAS 19), as amended
by FASB Staff Position (FSP) FAS 19-1, Accounting for Sus-
pended Well Costs, which provides that exploratory well costs
continue to be capitalized after the completion of drilling when
(a) the well has found a sufficient quantity of reserves to justify
completion as a producing well and (b) the enterprise is making
sufficient progress assessing the reserves and the economic and
operating viability of the project. If either condition is not met
or if an enterprise obtains information that raises substantial
doubt about the economic or operational viability of the proj-
ect, the exploratory well would be assumed to be impaired, and
its costs, net of any salvage value, would be charged to expense.
FAS 19 provides a number of indicators that can assist an entity
to demonstrate sufficient progress is being made in assessing
the reserves and economic viability of the project.
The following table indicates the changes to the com-
pany’s suspended exploratory well costs for the three years
ended December 31, 2007. No capitalized exploratory well
costs were charged to expense upon the 2005 adoption of
FSP FAS 19-1.
2007 2006 2005
Beginning balance at January 1 $ 1,239 $ 1,109 $ 671
Additions associated with the
acquisition of Unocal – – 317
Additions to capitalized exploratory
well costs pending the
determination of proved reserves 486 446 290
Reclassifications to wells, facilities
and equipment based on the
determination of proved reserves (23) (171) (140)
Capitalized exploratory well costs
charged to expense (42) (121) (6)
Other reductions* – (24) (23)
Ending balance at December 31 $ 1,660 $ 1,239 $ 1,109
* Represent property sales and exchanges.
The following table provides an aging of capitalized well
costs and the number of projects for which exploratory well
costs have been capitalized for a period greater than one year
since the completion of drilling. The aging of the former
Unocal wells is based on the date the drilling was completed,
rather than the date of Chevron’s acquisition of Unocal in 2005.
At December 31
2007 2006 2005
Exploratory well costs capitalized
for a period of one year or less $ 449 $ 332 $ 259
Exploratory well costs capitalized
for a period greater than one year 1,211 907 850
Balance at December 31 $ 1,660 $ 1,239 $ 1,109
Number of projects with exploratory
well costs that have been capitalized
for a period greater than one year* 54 44 40
* Certain projects have multiple wells or fields or both.
Of the $1,211 of exploratory well costs capitalized for
more than one year at December 31, 2007, $750 (32 projects)
is related to projects that had drilling activities under way or
firmly planned for the near future. An additional $8 (three
projects) is related to projects that had drilling activity during
2007. The $453 balance related to 19 projects in areas requir-
ing a major capital expenditure before production could begin
and for which additional drilling efforts were not under way
or firmly planned for the near future. Additional drilling was
not deemed necessary because the presence of hydrocarbons
had already been established, and other activities were in
process to enable a future decision on project development.
The projects for the $453 referenced above had the fol-
lowing activities associated with assessing the reserves and the

Notes to the Consolidated Financial Statements
