Ann: Half Year Accounts, page-24

The 9 million amortised was the write down value of the oil and gas produced over the period.

BRK ( all oil and gas companies) carry a book value of exploration and development assets.
When a company spends 10 million dollars on drilling an exploration well, and it fails to find oil and gas, the well is essentially worthless so the company has 2 choices. It can write off that expenditure in one hit, or if it thinks it still has a chance of discovering commercial oil, gas on that acreage, it can capitalise that expenditure on the balance sheet as an exploration “ asset”.

If a company carries a $ 10 million capitalised exploration asset which has discovered commercial oil and gas, and then spends another $ 10 mill to develop the asset to put it into production, it can capitalise that $ 10 million of development expenditure as a developed or producing asset, and move the initial $ 10 million exploration asset into the developed / producing asset column. This would result in a $0 exploration asset, and $ 20 million in the D/P asset column.

Now that the asset is producing, the reserves get depleted, and that depletion is reflected as an amortisation expense. The value of the reserves discovered will be / should be much greater than the expenditure to discover develop and produce/ transport the reserves which is where the “ profit “ is generated. The amortisation affects the “ profit” by decreasing it, but does not affect the cashflow. This has the effect of decreasing any tax payable which increases the amount of cash retained by the company.

At this stage, BRK doesn’t pay any tax, so there is no cash benefit from amortisation.

Hope that helps

Caio

Dan