Note 6. Capitalized Exploratory Well Costs and Undeveloped Leasehold Costs

Capitalized Exploratory Well Costs We capitalize exploratory well costs until a determination is made that the well has found proved reserves or is deemed noncommercial. If a well is deemed to be noncommercial, the well costs are immediately charged to exploration expense as dry hole cost. In addition, wells costs associated with a discovery may be charged to impairment expense if we choose not to pursue development activities.

Changes in capitalized exploratory well costs are as follows and exclude amounts that were capitalized and subsequently expensed in the same period:



	Year Ended December 31,
(millions)	2017			2016			2015
Capitalized Exploratory Well Costs, Beginning of Period	$	768		$	1,353		$	1,337
Additions to Capitalized Exploratory Well Costs Pending Determination of Proved Reserves	20			84			123
Divestitures and Other ⁽¹⁾	—			(143		)	—
Reclassified to Proved Oil and Gas Properties Based on Determination of Proved Reserves or to Assets Held for Sale ⁽²⁾	(203		)	(1		)	(19		)
Capitalized Exploratory Well Costs Charged to Expense ⁽³⁾	(65		)	(525		)	(88		)
Capitalized Exploratory Well Costs, End of Period	$	520		$	768		$	1,353

⁽¹⁾ The 2016 amount relates to the farm-down of a 35% interest in Block 12 offshore Cyprus to a new partner.

⁽²⁾ The 2017 amount relates to the approval and sanction of the first phase of development of the Leviathan field, offshore Israel.

The 2015 amount relates primarily to US onshore exploration activity.

⁽³⁾ Capitalized exploratory well costs charged to expense are included within exploration or impairment expense in our consolidated statements of operations.

The 2017 amount relates primarily to the write-off of costs associated with the Troubadour natural gas discovery, Gulf of Mexico, for which we chose not to pursue development activities. See Note 5. Asset Impairments.

The 2016 amount relates primarily to discoveries offshore West Africa. Following review of additional 3D seismic data, we determined these discoveries were impaired in the current forward outlook for crude oil prices. We also incurred expenses associated with the Silvergate exploratory well in the Gulf of Mexico. The well did not encounter commercial hydrocarbons and was plugged and abandoned.

The 2015 amount relates primarily to a property in northeast Nevada. After assessing its commercial viability in the current commodity price environment, we elected to discontinue exploration efforts.

The following table provides an aging of capitalized exploratory well costs based on the date that drilling commenced, and the number of projects that have been capitalized for a period greater than one year:



	December 31,
(millions)	2017		2016		2015
Exploratory Well Costs Capitalized for a Period of One Year or Less	$	10	$	69	$	95
Exploratory Well Costs Capitalized for a Period Greater Than One Year Since Commencement of Drilling	510		699		1,258
Balance at End of Period	$	520	$	768	$	1,353
Number of Projects with Exploratory Well Costs That Have Been Capitalized for a Period Greater Than One Year Since Commencement of Drilling	8		10		14

The following table provides a further aging of those exploratory well costs that have been capitalized for a period greater than one year since the commencement of drilling as of December 31, 2017:



			Suspended Since
Country/Project (millions)	Total		2015 - 2016			2013 - 2014		2012 & Prior		Progress
Gulf of Mexico
Katmai	$	147	$	56		$	91	$	—	Progressing a development scenario for this 2014 crude oil discovery. We are currently conducting feasibility and front-end engineering and design studies on host platform options.
Offshore Equatorial Guinea
Felicita (Block O)	47		3			12		32		Evaluating regional development scenarios for this 2008 gas discovery. During 2014, we conducted additional seismic activity over Blocks I and O and in early 2016, we began analyzing, interpreting and evaluating the acquired seismic data.
Yolanda (Block I)	23		1			6		16		A data exchange agreement for the 2007 Yolanda condensate and natural gas discovery has been executed between the governments of Equatorial Guinea and Cameroon. Our natural gas development team is working with the governments of Equatorial Guinea and Cameroon to evaluate natural gas monetization options for both Yolanda and YoYo (Cameroon) discoveries.
Offshore Cameroon
YoYo (YoYo Block)	55		4			6		45		A data exchange agreement for the 2007 YoYo condensate and natural gas discovery has been executed between the governments of Equatorial Guinea and Cameroon. Our natural gas development team is working with both governments to evaluate natural gas monetization options for both Yolanda (Equatorial Guinea) and YoYo discoveries. In June 2017, we converted our mining concession license for the YoYo block into a PSC.
Offshore Israel
Leviathan-1 Deep	91		8			10		73		The well did not reach the target interval in 2012. We continue to reprocess and review seismic information for this discovery, based on information obtained from other recent discoveries in the region, and develop future drilling plans to test this deep oil concept, which is held by the Leviathan Development and Production Leases.
Dalit	32		3			5		24		Our future development plan was approved by the Government of Israel to develop this 2009 natural gas discovery with a tie-in to existing infrastructure at Tamar. See also Note 4. Acquisitions, Divestitures and Merger.
Offshore Cyprus
Cyprus	97		15			52		30		In 2016, we farmed-down a 35% interest in Block 12 and submitted an updated development plan. We continue to work with the Government of Cyprus to obtain approval of the development plan and the subsequent issuance of an Exploitation License. Receiving an Exploitation License will allow us and our partners to perform the necessary engineering and design studies and progress the project to final investment decision. During 2017, we submitted an updated development plan, progressed capital project cost improvement and continued regional natural gas marketing efforts.
Other
Projects less than $20 million	18		(9		)	21		6		Continuing to assess and evaluate wells.
Total	$	510	$	81		$	203	$	226

Undeveloped Leasehold Costs We reclassify undeveloped leasehold costs to proved property costs when proved reserves, including PUDs, become attributable to the property as a result of our exploration and development activities. On the other hand, if, based upon a change in exploration plans, timing and extent of development activities, availability of capital and suitable rig and drilling equipment, resource potential, comparative economics, changing regulations and/or other factors, an impairment is indicated, we record impairment expense related to the respective leases or licenses.

As of December 31, 2017, we had remaining undeveloped leasehold costs, to which proved reserves had not been attributed, of$2.8 billion, including $1.6 billion related to Delaware Basin assets acquired in the Clayton Williams Energy Acquisition in 2017, and $1.1 billion and $149 million attributable to Delaware Basin and Eagle Ford Shale assets, respectively, acquired in the Rosetta Merger in 2015. Undeveloped leasehold costs were derived from allocated fair values as a result of business combinations or other purchases of unproved properties and are subject to impairment testing.

The remaining balance of undeveloped leasehold costs as of December 31, 2017 included $44 million related to Gulf of Mexico unproved properties and $53 million related to international unproved properties. These costs pertain to acquired leases or licenses that are subject to expiration over the next several years unless production is established on units containing the acreage. These costs are evaluated as part of our periodic impairment review.

During 2017, we completed geological evaluations of certain Gulf of Mexico leases and licenses and leases and licenses associated with other international unproved properties. We determined that several leases and licenses should be relinquished or exited. As a result, we recognized undeveloped leasehold impairment expense of $62 million primarily attributable to Gulf of Mexico leases. We recorded leasehold impairment expense of $93 million in 2016 and $21 million in 2015. This expense is included in exploration expense in the consolidated statements of operations.