CHAPTER lrh PROFILE OF QETROLEUM OPERATIONS: ANSWERS
The organic theory regarding the origin of oil and gas holds
that petroleum comes from ancient land and sea plants and
animals deposited in iowwlying areas millions of years ago. The
f. Assignment rights generally both the lessee and the
lessor may assign their rights without approval of the
See the book for other less common provisions.
7. Drilling operations that have accounting implications include
Chapter 2 Reading Notes
Introduction to Oil and Gas Accounting
1. Oil and gas accounting relates to accounting for the four basic costs incurred by
companies with oil and gas exploration and producing activities.
a. Acquisition costs costs incurred in acq
Chapter 1 Reading Notes
Upstream Oil and Gas Operations
1. Upstream Oil and Gas Operations
a. Traditionally, oil and gas operations have been classified as being either
upstream or downstream.
i. Upstream activities include exploration, acquisition, drill
Accounting for Asset Retirement Obligations and Asset Impairment
1. Accounting for Asset Retirement Obligations
Asset Retirement Obligation The liability recognized by a company for the
future dismantling and retirement of a long-lived asset.
Chapter 5 Reading Notes
Drilling and Development Costs Successful Efforts
1. Income Tax Accounting For Drilling Costs
a. For tax purposes, drilling and development costs are classified as either
intangible drilling costs (IDC) or equipment costs (lease an
Acquisition Costs of Unproved Property Successful Efforts
1. In the United States, interest in a property may be acquired through the purchase of
the mineral rights or the purchase of the fee interest.
a. Land purchased in fee means that both th
Chapter 6 Reading Notes
Proved Property Cost Disposition Successful Efforts
1. Cost Disposition Through Amortization
a. For successful efforts companies, acquisition costs of proved properties and
the costs of wells and equipment are amortized to become p
Nondrilling Exploration Costs Successful Efforts
1. Exploration involves identifying and examining areas that may contain oil and gas
a. Exploration costs are defined as costs incurred in identifying areas that may
Accounting for Production Activities
1. Accounting for Production Activities
a. Production activities involve lifting the oil and gas to the surface and then
gathering, treating, processing, and storing the oil and gas.
i. Costs incurred in the
Oil and Gas Accounting
With the Energy Policy and Conservation Act of 1975, the U.S. Securities and Exchange
Commission set financial accounting and reporting standards for publicly traded
companies engaged in oil and gas prod