1. Petroleum accounting section 1,2
Assistant lecture
Alya elfedawy

2. Classification of cost
Preliminary costs
Acquisition costs
Production costs
Exploration costs
Development costs

3. a. cost of acquiring the preliminary exploring
1. Preliminary costs
a. cost of acquiring the preliminary exploring
b. geological and geophysical G&G
2. Acquisition cost :
a. lease bonuses
b. brokers' fees
c. recording fees
d. legal costs
e. other costs such as costs related obtaining mineral rights.

4. 3. Exploration costs : a. Exploratory dry hole b
3. Exploration costs : a. Exploratory dry hole b. Exploratory well, successful 4. Development costs: a. Development dry hole b. Development well, successful 5. Production cost

5. Accounting treatment for costs
Current year a lot of year
Expenses
Capitalized

6. Accounting treatment for petroleum activates
Successful efforts
Full cost

7. Treatment under full costing (FC)
Treatment under successful efforts (SE)
Cost item N
Capitalize (C)
Expense (E)
geological and geophysical (G & G) 1 C
Acquisition cost 2 E
Exploratory dry hole 3
Exploratory well, successful 4
Development dry hole 5
Development well, successful 6
Production cost 7

8. EX:
GAS petroleum co. acquired a lease in the western desert in February The company incurred the following costs during 2005.
140,000 G & G cost.
250,000 Lease (acquisition cost).
6,000,000 exploratory dry holes.
2,600,000 exploratory wells, successful.
4,000,000 development dry holes.
1,200,000 development wells, successful.
120,000 production cost.

9. Required
1- Classify each cost item regarding the five stage. 2- Compare between each accounting method regarding each cost item (Which cost is expense and capitalize). 3- Calculate the total of expense and capitalize cost under each method.

10. Successful efforts (SE)
Full costing (FC)
Successful efforts (SE)
Stage
Cost item
Capitalize (C)
140,000
Expense (E)
70,000
Preliminary costs
geological and geophysical (G & G) C
250,000
125,000
Acquisition cost
Lease (acquisition cost)
6,000,000 E
3,000,000
Exploration costs
Exploratory dry hole
2,600,000
1,300,000
Exploratory well, successful
4,000,000
2,00,000
Development costs
Development dry hole
1200,000
600,000
Development well, successful
120,000
60,000
Production cost

11. 1) successful efforts:
A) Total expense cost= 140, ,000, ,000 =6,260,000.
B) Total capitalize cost= 250, ,600, ,000, ,200,000= 8,050,000. 
2) Under full cost
A) Total expense cost= 120,000.
B) Total capitalize cost= 140, , ,000, ,600, ,000, ,200,000= 14,190,000

12. H.W :
Petro get company acquired a lease in the western desert in april The company
incurred the following costs during 2007.
80,000 G&G cost
120,000 lease
2500,000 exploratory dry holes
1,000,000 exploratory wells, successful.
1000,000 development dry holes.
300,000 development wells, successful.
50,000 production cost.

13. Required: 1- Classify each cost item regarding the five stage
Required: 1- Classify each cost item regarding the five stage. 2- Compare between each accounting method regarding each cost item (Which cost is expense and capitalize). 3- Calculate the total of expense and capitalize cost under each method