114 Woodside Petroleum Ltd|Annual Report 2018
B.2 Exploration and evaluation
Oceania Asia Canada Africa Other Total
USm USm USm USm USm USm
Year ended 31 December 2018
Carrying amount at 1 January 2018
Additions
Amortisation of licence acquisition costs () () - () () ()
Expensed- () - () - ()
Transferred exploration and evaluation () - - - - ()
Carrying amount at 31 December 2018
Year ended 31 December 2017
Carrying amount at 1 January 2017
Additions
Amortisation of licence acquisition costs () () - () () ()
Expensed() () - () - ()
Carrying amount at 31 December 2017
Exploration commitments
Year ended 31 December 2018 -
Year ended 31 December 2017
1. $94 million of exploration and evaluation expensed relates to unsuccessful wells written o during the period (2017: $58 million).
Recognition and measurement
Expenditure on exploration and evaluation is accounted for
in accordance with the area of interest method. The Group’s
application of the accounting policy for the cost of exploring and
of evaluating discoveries is closely aligned to the US GAAP-based
successful eorts method.
Areas of interest are based on a geographical area. All exploration
and evaluation expenditure, including general permit activity,
geological and geophysical costs and new venture activity costs, is
expensed as incurred except for the following:
• where the expenditure relates to an exploration discovery that,
at the reporting date, has not been recognised as an area of
interest, because an assessment of the existence or otherwise of
economically recoverable reserves is not yet complete; or
• where the expenditure relates to a recognised area of interest
and it is expected that the expenditure will be recouped through
successful exploitation of the area of interest, or alternatively,
by its sale.
The costs of acquiring interests in new exploration and evaluation
licences are capitalised. The costs of drilling exploration wells are
initially capitalised pending the results of the well.
Costs are expensed where the well does not result in the
successful discovery of economically recoverable hydrocarbons
and the recognition of an area of interest.
Subsequent to the recognition of an area of interest, all further
evaluation costs relating to that area of interest are capitalised.
Upon approval for the commercial development of an area of
interest, accumulated expenditure for the area of interest is
transferred to oil and gas properties.
In the statement of cash flows, those cash flows associated
with capitalised exploration and evaluation expenditure,
including unsuccessful wells, are classified as cash flows used
in investing activities.
Exploration commitments
The Group has exploration expenditure obligations which are
contracted for, but not provided for in the financial statements.
These obligations may be varied from time to time and are
expected to be fulfilled in the normal course of operations
of the Group.
NOTES TO THE FINANCIAL STATEMENTS
B. PRODUCTION AND GROWTH ASSETS
for the year ended 31 December 2018
Key estimates and judgements
(a) Area of interest
An area of interest (AOI) is defined by the Group as an individual
geographical area whereby the presence of hydrocarbons is considered
favourable or proved to exist. The Group has established criteria
to recognise and maintain an AOI. There is separate guidance for
conventional and unconventional AOIs.
(b) Impairment of exploration and evaluation assets
The recoverability of the carrying amount of the exploration and
evaluation assets is dependent on successful development and
commercial exploitation, or alternatively, sale of the respective AOI.
Each potential or recognised AOI is reviewed half-yearly to determine
whether economic quantities of reserves have been found or whether
further exploration and evaluation work is underway or planned to
support continued carry forward of capitalised costs. Where a potential
impairment is indicated, assessment is performed using a fair value less
costs to dispose method to determine the recoverable amount for each
AOI to which the exploration and evaluation expenditure is attributed.
This assessment requires management to make certain estimates and
apply judgement in determining assumptions as to future events and
circumstances, in particular, the assessment of whether economic
quantities of reserves have been found. Any such estimates and
assumptions may change as new information becomes available. If, after
having capitalised expenditure under the policy, the Group concludes
that it is unlikely to recover the expenditure by future exploitation or
sale, then the relevant capitalised amount will be written o to the
income statement.