Property, Plant and Equipment

6 Months Ended

Jun. 30, 2011

Property, Plant and Equipment

Note B – Property, Plant and Equipment

Under U.S. generally accepted accounting principles for companies that use the successful efforts method of accounting, exploratory well costs should continue to be capitalized when the well has found a sufficient quantity of reserves to justify its completion as a producing well and the company is making sufficient progress assessing the reserves and the economic and operating viability of the project.

At June 30, 2011, the Company had total capitalized exploratory well costs pending the determination of proved reserves of $532.9 million. The following table reflects the net changes in capitalized exploratory well costs during the six-month periods ended June 30, 2011 and 2010.

(Thousands of dollars)	2011		2010
Beginning balance at January 1	$	497,765		369,862
Additions pending the determination of proved reserves		35,138		60,562
Reclassifications to proved properties based on the determination of proved reserves		0		0
Balance at June 30	$	532,903		430,424

The following table provides an aging of capitalized exploratory well costs based on the date the drilling was completed for each individual well and the number of projects for which exploratory well costs have been capitalized. The projects are aged based on the last well drilled in the project.

	June 30,
	2011						2010
(Thousands of dollars)	Amount		No. of Wells		No. of Projects		Amount		No. of Wells		No. of Projects
Aging of capitalized well costs:
Zero to one year	$	116,514		16		5	$	103,705		14		5
One to two years		96,709		11		2		102,446		10		4
Two to three years		104,420		8		4		17,946		2		2
Three years or more		215,260		32		5		206,327		32		4
	$	532,903		67		16	$	430,424		58		15

Of the $416.4 million of exploratory well costs capitalized more than one year at June 30, 2011, $252.9 million is in Malaysia, $136.9 million is in the U.S., $15.2 million is in Republic of the Congo, and $11.4 million is in Canada. In Malaysia either further appraisal or development drilling is planned and/or development studies/plans are in various stages of completion. In the U.S. drilling and development operations are planned. In Republic of the Congo further appraisal drilling is planned. In Canada a drilling and development program continues.

In July 2010, the Company announced that its Board of Directors had approved plans to exit the U.S. refining and U.K. refining and marketing businesses. These operations are encompassed within the U.S. manufacturing and U.K. refining and marketing segments presented in Note P. On July 25, 2011, the Company announced that it had entered into an agreement to sell the Superior, Wisconsin refinery and related assets for $214 million. As part of this agreement, liquid inventories at these locations will also be sold at fair value. The Company expects to report a gain on this transaction, but the gain will vary based primarily on the level and price of liquid inventories held in storage at the time the sale is completed, which is expected to occur late in the third quarter or early in the fourth quarter. The sale process for the Meraux, Louisiana refinery and U.K. downstream assets continues. Based on current market conditions, it is possible that the Company could incur a loss on future sales of the Meraux refinery and U.K. downstream assets. The Company expects that the results of these operations will be presented as discontinued operations in future periods when the criteria for held for sale under U.S. generally accepted accounting principles have been met.