Chevron Corp. (CVX)

The successful efforts method is used for crude oil and natural gas exploration and production activities. All costs for development wells, related plant and equipment, proved mineral interests in crude oil and natural gas properties, and related asset retirement obligation (ARO) assets are capitalized. Costs of exploratory wells are capitalized pending determination of whether the wells found proved reserves. Costs of wells that are assigned proved reserves remain capitalized. Costs also are capitalized for exploratory wells that have found crude oil and natural gas reserves even if the reserves cannot be classified as proved when the drilling is completed, provided the exploratory well has found a sufficient quantity of reserves to justify its completion as a producing well and Chevron is making sufficient progress assessing the reserves and the economic and operating viability of the project. All other exploratory wells and costs are expensed.

Long-lived assets to be held and used, including proved crude oil and natural gas properties, are assessed for possible impairment by comparing their carrying values with their associated undiscounted, future net cash flows. Events that can trigger assessments for possible impairments include write-downs of proved reserves based on field performance, significant decreases in the market value of an asset (including changes to the commodity price forecast), significant change in the extent or manner of use of or a physical change in an asset, and a more-likely-than-not expectation that a long-lived asset or asset group will be sold or otherwise disposed of significantly sooner than the end of its previously estimated useful life. Impaired assets are written down to their estimated fair values, generally their discounted, future net cash flows. For proved crude oil and natural gas properties, Chevron performs impairment reviews on a country, concession, PSC, development area or field basis, as appropriate. In Downstream, impairment reviews are performed on the basis of a refinery, a plant, a marketing/lubricants area or distribution area, as appropriate. Impairment amounts are recorded as incremental "Depreciation, depletion and amortization" expense.

Long-lived assets that are held for sale are evaluated for possible impairment by comparing the carrying value of the asset with its fair value less the cost to sell. If the net book value exceeds the fair value less cost to sell, the asset is considered impaired and adjusted to the lower value. The fair value of a liability for an ARO is recorded as an asset and a liability when there is a legal obligation associated with the retirement of a long-lived asset and the amount can be reasonably estimated.

Depreciation and depletion of all capitalized costs of proved crude oil and natural gas producing properties, except mineral interests, are expensed using the unit-of-production method, generally by individual field, as the proved developed reserves are produced. Depletion expenses for capitalized costs of proved mineral interests are recognized using the unit-of-production method by individual field as the related proved reserves are produced. Impairments of capitalized costs of unproved mineral interests are expensed.

The capitalized costs of all other plant and equipment are depreciated or amortized over their estimated useful lives. In general, the declining-balance method is used to depreciate plant and equipment in the United States; the straight-line method is generally used to depreciate international plant and equipment and to amortize all capitalized leased assets.

Gains or losses are not recognized for normal retirements of properties, plant and equipment subject to composite group amortization or depreciation. Gains or losses from abnormal retirements are recorded as expenses, and from sales as "Other income."

Expenditures for maintenance (including those for planned major maintenance projects), repairs and minor renewals to maintain facilities in operating condition are generally expensed as incurred. Major replacements and renewals are capitalized.

Source: Chevron Corp., Annual Report

Chevron Corp., Statement of Financial Position, Property, Plant and Equipment

USD $ in millions

Source: Based on data from Chevron Corp. Annual Reports

Item	Description	The company
Properties, plant and equipment, at cost	Carrying amount at the balance sheet date for long-lived physical assets used in the normal conduct of business and not intended for resale. This can include land, physical structures, machinery, vehicles, furniture, computer equipment, construction in progress, and similar items. Amount does not include depreciation.	Chevron Corp.'s properties, plant and equipment, at cost declined from 2015 to 2016 but then increased from 2016 to 2017 exceeding 2015 level.
Properties, plant and equipment, net	Tangible assets that are held by an entity for use in the production or supply of goods and services, for rental to others, or for administrative purposes and that are expected to provide economic benefit for more than one year; net of accumulated depreciation. Examples include land, buildings, and production equipment.	Chevron Corp.'s properties, plant and equipment, net declined from 2015 to 2016 and from 2016 to 2017.

Chevron Corp., Property, Plant and Equipment Ratios

Ratio	Description	The company
Average age	As long as straight-line depreciation is used, this is an accurate estimate of asset age as a percentage of depreciable life. The relative age is a useful measure of whether the company's fixed asset base is old or new. Newer assets are likely to be more efficient.	Chevron Corp.'s average age of depreciable property, plant and equipment deteriorated from 2015 to 2016 and from 2016 to 2017.
Estimated total useful life	Over longer time periods, this ratio is a useful measure of company's depreciation policy and can be used for comparisons with competitors.	Chevron Corp.'s estimated total useful life of depreciable property, plant and equipment increased from 2015 to 2016 and from 2016 to 2017.
Estimated time elapsed since purchase	The approximate age in years of a company's fixed assets. Useful for comparison purposes.	Chevron Corp.'s estimated time elapsed since purchase of depreciable property, plant and equipment deteriorated from 2015 to 2016 and from 2016 to 2017.
Estimated remaining life		Chevron Corp.'s estimated remaining life of depreciable property, plant and equipment increased from 2015 to 2016 but then slightly declined from 2016 to 2017.

2017 Calculations

Ratio	Description	The company
Average age	As long as straight-line depreciation is used, this is an accurate estimate of asset age as a percentage of depreciable life. The relative age is a useful measure of whether the company's fixed asset base is old or new. Newer assets are likely to be more efficient.	Chevron Corp.'s average age of depreciable property, plant and equipment deteriorated from 2015 to 2016 and from 2016 to 2017.

2017 Calculations

Ratio	Description	The company
Estimated total useful life	Over longer time periods, this ratio is a useful measure of company's depreciation policy and can be used for comparisons with competitors.	Chevron Corp.'s estimated total useful life of depreciable property, plant and equipment increased from 2015 to 2016 and from 2016 to 2017.

2017 Calculations

Ratio	Description	The company
Estimated time elapsed since purchase	The approximate age in years of a company's fixed assets. Useful for comparison purposes.	Chevron Corp.'s estimated time elapsed since purchase of depreciable property, plant and equipment deteriorated from 2015 to 2016 and from 2016 to 2017.

2017 Calculations

Ratio	Description	The company
Estimated remaining life		Chevron Corp.'s estimated remaining life of depreciable property, plant and equipment increased from 2015 to 2016 but then slightly declined from 2016 to 2017.