For the year ended December 31, 2010, geological, geophysical and engineering expenses increased $11.4 million to $19.1 million compared to $7.7 million for the same period in 2009. The $11.4 million increase is comprised of increased seismic acquisition costs of $10.5 million and increased environmental laboratory and consulting expenses of $0.9 million. The increase of $0.9 million of environmental laboratory and consulting expenses is due to additional environmental studies for Block Z-1, Block XXII and Block XXIII and additional water discharge monitoring for our production systems during the extended testing period.

For the year ended December 31, 2010, the Company incurred $16.8 million of seismic acquisition costs as part of our plan to obtain approximately 370 square kilometers of 3-D seismic data and 314 kilometers of 2-D seismic data related to Block XXIII and 260 kilometers of 2-D seismic data for Block XXII. During the year ended December 31, 2009, the Company incurred  a cost of $6.3 million as part of its plan to acquire approximately 1,500 square kilometers of 3-D seismic data for Block Z-1.

Dry Hole Costs

For year ended December 31, 2010, the Company wrote-off $17.9 million of exploratory dry hole costs related to the A-17D well in the Albacora field which, in September 2010, was determined to have no commercial quantities of hydrocarbons and was abandoned. In addition, we wrote-off $14.9 million of suspended well costs for two previously drilled wells, the A-15D and A-16D, as those wells were intended to follow the same trajectory and reach the same location as the A-17D well but neither reached the target due to mechanical problems and both wells were abandoned. There were no similar expenses for the same periods in 2009.

Depreciation, Depletion and Amortization

For the three months ended December 31, 2010 and 2009, depreciation, depletion and amortization expense were $9.6 million and $6.5 million, respectively. For the three months ended December 31, 2010, approximately 30% of depletion expense came from oil sold from the Albacora field and 70% came from oil originating from the Corvina field. During the same period in 2009, all of the depletion expense came from oil sales originating from the Corvina field. Because the depletion rate for the Albacora field is less than that of the Corvina field, depreciation, depletion and amortization increased by only 46% while the number of barrels sold increased 116%. 

If you liked this article you might like

Why BPZ Resources (BPZ) Stock Is Surging Today

Why BPZ Resources Inc. (BPZ) Is Up Today

Contrarian Ideas: Hedge Funds Are Selling These 10 Stocks Trading Below Target Price

8 Stocks Roaring Higher on Unusual Volume

5 Stocks Under $10 Poised for Breakouts