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Exxon’s Estimated Future
Total Prudhoe Bay DRR Costs
Year (Millions)
1977 $215
1978 215
1979 228
1980 122
1981 162
1982 180
1983 247
1984 300
1985 300
1986 333
1987 209
1988 209
As indicated, in its financial income statements for each
year, Exxon included a depreciation expense item relating to its
share of the above estimated future Prudhoe Bay DRR costs. On
Exxon’s financial income statements for each year, the amount of
the depreciation expense item reported for estimated Prudhoe Bay
DRR costs was calculated roughly on the basis of the above
estimates of total future Prudhoe Bay DRR costs and on the basis
of the units of oil production that occurred in each year
relative to Exxon’s estimates of total oil recovery that would
occur at Prudhoe Bay over the projected life of the field,
reflecting Exxon’s 22-percent interest in the PBU.
Following FAS 19 and oil industry practice, however, on its
annual financial balance sheet statements Exxon did not accrue as
a fixed capital liability or cost any of the above estimated
Prudhoe Bay DRR costs. Rather, on such yearend financial balance
sheet statements, the amount of the annual depreciation expense
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