The company accounts for the cost of exploratory wells in accordance with FASB Statement No. 19, Financial and Reporting by Oil and Gas Producing Companies (FAS 19), as amended by FASB Staff Position (FSP) FAS 19-1, Accounting for Suspended Well Costs, which provides that exploratory well costs continue to be capitalized after the completion of drilling when (a) the well has found a sufficient quantity of reserves to justify completion as a producing well and (b) the enterprise is making sufficient progress assessing the reserves and the economic and operating viability of the project. If either condition is not met or if an enterprise obtains information that raises substantial doubt about the economic or operational viability of the project, the exploratory well would be assumed to be impaired, and its costs, net of any salvage value, would be charged to expense. FAS 19 provides a number of indicators that can assist an entity to demonstrate sufficient progress is being made in assessing the reserves and economic viability of the project.

The following table indicates the changes to the company's suspended exploratory well costs for the three years ended December 31, 2008:

2008 2007 2006
*

Represent property sales and exchanges.
Beginning balance at January 1 $1,660 $1,239 $1,109
Additions to capitalized exploratory well costs pending the determination of proved reserves 643 486 446
Reclassifications to wells, facilities and equipment based on the determination of proved reserves (49) (23) (171)
Capitalized exploratory well costs charged to expense (136) (42) (121)
Other reductions* – – (24)
Ending balance at December 31 $2,118 $1,660 $1,239

The following table provides an aging of capitalized well costs and the number of projects for which exploratory well costs have been capitalized for a period greater than one year since the completion of drilling:

At December 31
2008 2007 2006
*

Certain projects have multiple wells or fields or both.
Exploratory well costs capitalized for a period of
one year or less		 $559 $449 $332
Exploratory well costs capitalized for a period greater than one year 1,559 1,211 907
Balance at December 31 $2,118 $1,660 $1,239
Number of projects with exploratory well costs that have been capitalized for a period greater than one year* 50 54 44

Of the $1,559 of exploratory well costs capitalized for more than one year at December 31, 2008, $874 (27 projects) is related to projects that had drilling activities under way or firmly planned for the near future. An additional $279 (four projects) is related to projects that had drilling activity during 2008. The $406 balance is related to 19 projects in areas requiring a major capital expenditure before production could begin and for which additional drilling efforts were not under way or firmly planned for the near future. Additional drilling was not deemed necessary because the presence of hydrocarbons had already been established, and other activities were in process to enable a future decision on project development.

The projects for the $406 referenced above had the following activities associated with assessing the reserves and the projects' economic viability: (a) $107 (two projects) – government approval of the plan of development received in fourth quarter 2008; (b) $73 (two projects) – continued unitization efforts on adjacent discoveries that span international boundaries; (c) $49 (one project) – alignment of project stakeholders regarding scope and commercial strategy; (d) $46 (one project) – subsurface and facilities engineering studies ongoing with front-end-engineering and design expected in late 2009; (e) $40 (one project) continued review of development options; (f) $91 – miscellaneous activities for 12 projects with smaller amounts suspended. While progress was being made on all 50 projects, the decision on the recognition of proved reserves under SEC rules in some cases may not occur for several years because of the complexity, scale and negotiations connected with the projects. The majority of these decisions are expected to occur in the next three years.

The $1,559 of suspended well costs capitalized for a period greater than one year as of December 31, 2008, represents 195 exploratory wells in 50 projects. The tables below contain the aging of these costs on a well and project basis:

Aging based on drilling completion date of individual wells: Amount Number
of wells
1992 $7 3
1994-1997 $31 4
1998-2002 176 34
2003-2007 1,345 154
Total $1,559 195


Aging based on drilling completion date of last suspended
well in project:		 Amount Number
of projects
1992 $7 1
1999 $8 1
2003 69 3
2004-2008 1,475 45
Total $1,559 50