Crank Oil (a successful efforts company) drilled a well in Azerbaijan during the exploration phase of their
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Crank Oil (a successful efforts company) drilled a well in Azerbaijan during the exploration phase of their PSC. The exploratory well was a dry hole. However, according to the PSC, the cost of drilling the exploratory well is recoverable.
What is the correct financial accounting treatment of the cost of drilling the well?
a. Capitalized as wells and related equipment and facilities
b. Expensed as exploratory dry hole
c. Capitalized as receivable—PSC
d. Credited to wells and related equipment and facilities
e. None of these
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