What are they?
Did you know, U.S companies follow one of two methods of financial accounting for petroleum E&P activities: successful efforts or full cost?
The successful efforts methods has only the cost of successful efforts capitalized as oil and gas properties. Cost of explanatory dry holes, geological and geophysical (G&G) cost in general, delay rentals, and other property carry costs are expensed. Under the full cost method all property acquisitions, exploration, and development cost, even dry hole costs are capitalized as oil and gas properties. These cost represent fixed assets, amortized on a country-by-country basis using a unit-of-production method based on volumes produced and remaining proved reserves.
If a company drills five exploratory wells for $1 million each and only one finds proved reserves, the successful efforts methods recognizes a $1 million asset, whereas the full cost method would recognize a $5 million asset.
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Source: Petroleum Accounting
Hello, I'm Terra the Founder and Marketing Director of Fontenot & Associates Solutions. Thank you for joining my Accounting world. Our blog's purpose is to teach with the determination of closing industry and accounting process gaps that knowingly exist with our uniquely designed detailed procedures and trainings.
My mission is to offer the best accounting results for all companies seeking to close their process gaps with actual solutions. With my Bachelors and Masters Degree in Accounting, I strive for continuous development and professional growth in this profession. My professional career has been in the Oil & Gas industry for nearly the past 10 years but my business focus is to support and train accounting professionals in all industries.