| 7. | Property, Plant and Equipment |
Property, plant and equipment at December 31 were as follows:
| 2013 | 2012 | |||||||
| (In millions) | ||||||||
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Exploration and Production |
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Unproved properties |
$ | 2,460 | $ | 3,558 | ||||
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Proved properties |
4,121 | 4,072 | ||||||
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Wells, equipment and related facilities |
37,274 | 35,385 | ||||||
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| 43,855 | 43,015 | |||||||
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Retail Marketing, Corporate and Other |
2,095 | 2,538 | ||||||
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Total — at cost |
45,950 | 45,553 | ||||||
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Less: Reserves for depreciation, depletion, amortization and lease impairment |
17,179 | 16,746 | ||||||
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Property, plant and equipment — net |
$ | 28,771 | $ | 28,807 | ||||
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Assets Held for Sale: In March 2013, the Corporation approved a plan to divest its E&P assets in Thailand (comprising the Pailin (Hess 15%) and Sinphuhorm (Hess 35%) fields) and the Pangkah Field, offshore Indonesia (Hess 75%). At December 31, 2013, the book value of assets associated with these properties totaling $1,097 million, primarily consisting of the net property, plant and equipment balances as well as allocated goodwill of $76 million, were reported as assets held for sale. In addition, liabilities related to these properties totaling $286 million, primarily consisting of asset retirement obligations and deferred income taxes, were reported in liabilities associated with assets held for sale. At December 31, 2012, assets totaling $1,092 million, including allocated goodwill of $100 million, and liabilities totaling $539 million that were related to the ACG and Beryl fields, which were divested in the first quarter of 2013, were reported as held for sale. Properties classified as held for sale are not depreciated but are subject to impairment testing.
Capitalized Exploratory Wells Costs: The following table discloses the amount of capitalized exploratory well costs pending determination of proved reserves at December 31, and the changes therein during the respective years:
| 2013 | 2012 | 2011 | ||||||||||
| (In millions) | ||||||||||||
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Beginning balance at January 1 |
$ | 2,259 | $ | 2,022 | $ | 1,783 | ||||||
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Additions to capitalized exploratory well costs pending the determination of proved reserves |
237 | 407 | 512 | |||||||||
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Reclassifications to wells, facilities and equipment based on the determination of proved reserves |
(106 | ) | (41 | ) | (171 | ) | ||||||
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Capitalized exploratory well costs charged to expense |
(267 | ) | (129 | ) | (90 | ) | ||||||
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Dispositions and other |
(78 | ) | — | (12 | ) | |||||||
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Ending balance at December 31 |
$ | 2,045 | $ | 2,259 | $ | 2,022 | ||||||
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Number of wells at end of year |
50 | 68 | 59 | |||||||||
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In 2013, capitalized well costs reclassified based on the determination of proved reserves primarily related to the Shenzi project in the Gulf of Mexico. Capitalized exploratory well costs charged to expense in 2013 in the preceding table include $260 million to write-off previously capitalized exploration wells in Area 54, offshore Libya, due to civil unrest. The preceding table excludes exploratory dry hole costs of $77 million, $248 million and $348 million in 2013, 2012 and 2011, respectively, which were incurred and subsequently expensed in the same year.
At December 31, 2013, exploratory drilling costs capitalized in excess of one year past completion of drilling were incurred as follows (in millions):
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2012 |
$ | 372 | ||
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2011 |
385 | |||
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2010 |
358 | |||
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2009 |
159 | |||
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2008 and prior |
610 | |||
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| $ | 1,884 | |||
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The capitalized well costs in excess of one year relate to 8 projects. Approximately 45% relates to Block WA-390-P, offshore Western Australia, where development planning and commercial activities, including negotiations with potential liquefaction partners, are ongoing. Successful negotiation with a third party liquefaction partner is necessary before the Corporation can negotiate a gas sales agreement and sanction development of the project. Approximately 27% relates to the Corporation’s Pony discovery on Block 468 in the deepwater Gulf of Mexico, and 8% relates to the Pony #3 well on Block 469. The Corporation has signed an exchange agreement with the partners of the adjacent Green Canyon Blocks 512 and 511, which contain the Knotty Head discovery. Under this agreement, Hess was appointed operator and has a 20% working interest in the blocks, which are now collectively referred to as the Stampede project. An application to unitize Blocks 468, 512, the western half of 469 and the eastern half of 511 is due to be filed with the Bureau of Safety and Environmental Enforcement in the first quarter of 2014. Field development planning is progressing and the project is targeted for sanction in 2014. Approximately 16% relates to offshore Ghana where the Corporation has drilled seven successful exploration wells. Appraisal plans for the seven wells on the block were submitted to the Ghanaian government for approval in June 2013 and by year-end four had been approved. The Corporation plans to commence a three well appraisal drilling program in the second half of 2014. The remainder of the capitalized well costs in excess of one year relates to projects where further drilling is planned or development planning and other assessment activities are ongoing to determine the economic and operating viability of the projects.