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This excerpt taken from the PBR 20-F filed May 22, 2009. Impact
of Oil and Gas Reserves and Prices on Testing for
Impairment
At December 31, 2008, our property, plant, and equipment,
net of accumulated depletion, amounted to U.S.$85 billion.
A substantial part of this amount consisted of oil and gas
producing properties. These properties are reviewed for
impairment whenever events or changes in circumstances indicate
that the carrying amounts may not be recoverable. We estimate
the future and discounted cash flows of the affected properties
to judge the recoverability of carrying amounts. In general,
analyses are based on proved reserves, except in circumstances
where it is probable that additional non-proved reserves will be
developed and contribute to cash flows in the future; the
percentage of probables that we include in cash flows does not
exceed our past success ratios in developing probable reserves.
We perform asset valuation analyses on an ongoing basis as a
part of our management program. These analyses monitor the
performance of assets against corporate objectives. They also
assist us in reviewing whether the carrying amounts of any of
our assets may not be recoverable. In addition to estimating oil
and gas reserve volumes in conducting these analyses, it is also
necessary to estimate future oil and gas prices.
In general, we do not view temporarily low oil prices as a
trigger event for conducting impairment tests. The markets for
crude oil and natural gas have a history of significant price
volatility. Although prices will occasionally drop
precipitously, industry prices over the long term will continue
to be driven by market supply and demand fundamentals.
Accordingly, any impairment tests that we perform make use of
our long-term price assumptions for the crude oil and natural
gas markets. These are the same price assumptions that are used
in our planning and budgeting processes and our capital
investment decisions, and they are considered to be reasonable,
conservative estimates given market indicators and past
experience. Significantly lower future oil and gas prices could
lead to impairments in the future, if such decreases were
considered to be indicative of long-term trends. In addition,
significant changes in production curve expectation, discount
and/or
required production and lifting costs, could affect impairment
analysis.
While such uncertainties are inherent to this estimation
process, the amount of impairment charges in past years has been
small relative to the total value of oil and gas producing
properties: U.S.$519 million in 2008, U.S.$271 million
in 2007 and U.S.$21 million in 2006. Based on our
experience, we believe that future variability in estimates will
have a small impact on both assets and expense.
This excerpt taken from the PBR 20-F filed Jun 30, 2005. Impact of Oil and Gas Reserves and Prices on Testing for Impairment
A substantial part of our property, plant, and equipment — U.S.$37.0 billion, net of accumulated depletion, at December 31, 2004—consists of oil and gas producing properties. These properties are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. We estimate the future and discounted cash flows of the affected properties to judge the recoverability of carrying amounts. In general, analyses are based on proved reserves, except in circumstances where it is probable that
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Table of Contentsadditional non-proved reserves will be developed and contribute to cash flows in the future; the percentage of probables that we include in cash flows does not exceed our past success ratios in developing probable reserves.
We perform asset valuation analyses on an ongoing basis as a part of our management program. These analyses monitor the performance of assets against corporate objectives. They also assist us in reviewing whether the carrying amounts of any of our assets may not be recoverable. In addition to estimating oil and gas reserve volumes in conducting these analyses, it is also necessary to estimate future oil and gas prices.
In general, we do not view temporarily low oil prices as a trigger event for conducting the impairment tests. The markets for crude oil and natural gas have a history of significant price volatility. Although prices will occasionally drop precipitously, industry prices over the long term will continue to be driven by market supply and demand fundamentals. Accordingly, any impairment tests that we perform make use of our long-term price assumptions for the crude oil and natural gas markets. These are the same price assumptions that are used in our planning and budgeting processes and our capital investment decisions, and they are considered to be reasonable, conservative estimates given market indicators and past experience. Significantly lower future oil and gas prices could lead to impairments in the future, if such decreases were considered to be indicative of long-term trends. Additionally, significant changes in production curve expectation, discount and/or required production and lifting costs, could affect impairment analysis. While such uncertainties are inherent to this estimation process, the amount of impairment charges in past years has been small relative to the total value of oil and gas producing properties: U.S.$65 million in 2004, U.S.$70 million in 2003 and U.S.$75 million in 2002. Bases on our experience, we believe that future variability in estimates will have a small impact on both assets and expense.
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