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80 Chevron Corporation 2008 Annual Report
government approval of the plan of development received
in fourth quarter 2008; (b) $73 (two projects) – continued
unitization efforts on adjacent discoveries that span inter-
national boundaries; (c) $49 (one project) – alignment of
project stakeholders regarding scope and commercial strategy;
(d) $46 (one project) – subsurface and facilities engineer-
ing studies ongoing with front-end-engineering and design
expected in late 2009; (e) $40 (one project) continued review
of development options; (f) $91 – miscellaneous activities for
12 projects with smaller amounts suspended. While progress
was being made on all 50 projects, the decision on the recog-
nition of proved reserves under SEC rules in some cases may
not occur for several years because of the complexity, scale
and negotiations connected with the projects. The majority of
these decisions are expected to occur in the next three years.
The $1,559 of suspended well costs capitalized for a
period greater than one year as of December 31, 2008, rep-
resents 195 exploratory wells in 50 projects. The tables below
contain the aging of these costs on a well and project basis:
Number
Aging based on drilling completion date of individual wells: Amount of wells
1992 $ 7 3
1994–1997 31 4
1998–2002 176 34
2003–2007 1,345 154
Total $ 1,559 195
Aging based on drilling completion date of last Number
suspended well in project: Amount of projects
1992 $ 7 1
1999 8 1
2003 69 3
2004–2008 1,475 45
Total $ 1,559 50
Note 21
Stock Options and Other Share Based Compensation
Compensation expense for stock options for 2008, 2007 and
2006 was $168 ($109 after tax), $146 ($95 after tax) and
$125 ($81 after tax), respectively. In addition, compensation
expense for stock appreciation rights, performance units and
restricted stock units was $132 ($86 after tax), $205 ($133
after tax) and $113 ($73 after tax) for 2008, 2007 and 2006,
respectively. No significant stock-based compensation cost
was capitalized at December 31, 2008 and 2007.
Cash received in payment for option exercises under all
share-based payment arrangements for 2008, 2007 and 2006
was $404, $445 and $444, respectively. Actual tax benefits
realized for the tax deductions from option exercises were
$103, $94 and $91 for 2008, 2007 and 2006, respectively.
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, 2008:
2008 2007 2006
Beginning balance at January 1 $ 1,660 $ 1,239 $ 1,109
Additions to capitalized exploratory
well costs pending the
determination of proved reserves 643 486 446
Reclassifications to wells, facilities
and equipment based on the
determination of proved reserves (49) (23) (171)
Capitalized exploratory well costs
charged to expense (136) (42) (121)
Other reductions* – – (24)
Ending balance at December 31 $ 2,118 $ 1,660 $ 1,239
* 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:
At December 31
2008 2007 2006
Exploratory well costs capitalized
for a period of one year or less $ 559 $ 449 $ 332
Exploratory well costs capitalized
for a period greater than one year 1,559 1,211 907
Balance at December 31 $ 2,118 $ 1,660 $ 1,239
Number of projects with exploratory
well costs that have been capitalized
for a period greater than one year* 50 54 44
* Certain projects have multiple wells or fields or both.
Of the $1,559 of exploratory well costs capitalized for
more than one year at December 31, 2008, $874 (27 projects)
is related to projects that had drilling activities under way or
firmly planned for the near future. An additional $279 (four
projects) is related to projects that had drilling activity dur-
ing 2008. The $406 balance is related to 19 projects in areas
requiring 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 hydrocar-
bons had already been established, and other activities were
in process to enable a future decision on project development.
The projects for the $406 referenced above had the fol-
lowing activities associated with assessing the reserves and
the projects’ economic viability: (a) $107 (two projects) –
Note 20 Accounting for Suspended Exploratory Wells – Continued
Notes to the Consolidated Financial Statements
Millions of dollars, except per-share amounts