Hess 2014 Annual Report Download - page 79

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HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
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Gulf of Mexico. In 2013, reclassifications to wells, facilities and equipment based on the determination of proved reserves primarily
related to the Shenzi project in the Gulf of Mexico. Capitalized exploratory well costs charged to expense in 2013 included $260
million to write-off two previously capitalized exploration wells in Area 54, offshore Libya, due to civil unrest in the country. The
preceding table excludes exploratory dry hole costs of $66 million, $77 million and $248 million in 2014, 2013 and 2012,
respectively, which were incurred and subsequently expensed in the same year.
At December 31, 2014, exploratory drilling costs capitalized in excess of one year past the indicated year of completion of drilling
were as follows (in millions):
2013 ....................................................................................................................................................................................... $ 74
2012 ....................................................................................................................................................................................... 373
2011 ....................................................................................................................................................................................... 338
2010 ....................................................................................................................................................................................... 211
2009 and prior ........................................................................................................................................................................ 236
$ 1,232
Capitalized exploratory well costs greater than one year old after completion of drilling were $1,232 million at December 31, 2014.
Approximately 68% of the capitalized well costs in excess of one year relates to Block WA-390-P, offshore Western Australia, where
development planning and commercial activities for the Corporation’s natural gas discoveries are ongoing. In December 2014, the
Corporation executed a non-binding letter of intent with the North West Shelf (NWS), a third party joint venture with existing natural
gas processing and liquefaction facilities. Successful execution of binding agreements with NWS is necessary before the Corporation
can execute a gas sales agreement and sanction development of the project. Approximately 30% relates to offshore Ghana where the
Corporation has drilled seven successful exploration wells. Appraisal plans for the seven wells on the block were submitted to the
Ghanaian government in June 2013 for approval. Four of the plans were approved and discussions continue with the government on
the three remaining appraisal plans. In the third quarter of 2014, the Corporation completed a three well appraisal program in Ghana.
Well results are being evaluated and development planning is progressing. The remaining 2% of the capitalized well costs in excess
of one year relates to projects where further drilling is planned or development planning and other assessment activities are ongoing to
determine the economic and operating viability of the projects.
7. Goodwill
The changes in the carrying amount of goodwill are as follows:
2014 2013
(In millions)
Beginning balance at January 1 .........................................................................................................................
$ 1,869 $ 2,208
Acquisitions .................................................................................................................................................. 115
—
Dispositions* ................................................................................................................................................. (126) (339)
Ending balance at December 31 .........................................................................................................................
$ 1,858 $ 1,869
*In 2013, the dispositions include $21 million allocated to other assets sold and $76 million that was classified as held for sale and reported within Other current
assets.
The increase in goodwill in 2014 resulted from the Corporation’s acquisition of WilcoHess, which was subsequently disposed of as
part of the sale of the Corporation’s retail marketing operations. See Note 2, Discontinued Operations, in the Notes to the
Consolidated Financial Statements.
8. Asset Impairments
In 2013, the Corporation announced the sale of its E&P assets in Indonesia for approximately $1.3 billion. The sale was executed
in two separate transactions, with Natuna A completing in December 2013 and Pangkah in January 2014, as a result of a partner
exercising their preemptive rights. Based on the sales proceeds for each transaction, results of operations for 2013 included a pre-tax
gain on sale related to Natuna A of $388 million ($343 million after income taxes), and a pre-tax asset impairment charge of
$289 million ($187 million after income taxes) to adjust the carrying value of the Pangkah assets to their fair value at December 31,
2013.
During 2012, the Corporation recorded E&P asset impairment charges totaling $582 million ($344 million after income taxes).
These impairment charges consisted of $374 million ($228 million after income taxes) associated with the divestiture of assets in the
Eagle Ford Shale in Texas and $208 million ($116 million after income taxes) related to non-producing properties in the UK North
Sea.