approximately sixty percent of the savings in 2004 and the full amount in 2005 and beyond. The 2003 expense is reflected principally in general and administrative expense in the income statement. 

Exploration and production earnings in 2003 include income tax benefits of $30 million reflecting the recognition of cer- tain prior year foreign exploration expenses for United States income tax purposes. In addition, the Corporation recorded a pre-tax gain of $47 million from the sale of its 1.5% interest in the Trans-Alaska Pipeline System. A pre-tax loss of $9 million was recorded in refining and marketing earnings as a result of the sale of a shipping joint venture. Gains and losses on asset sales are reflected in non-operat- ing income (expense) in the income statement. 

2002: The Corporation recorded a pre-tax impairment charge of $706 million relating to the Ceiba field in Equator- ial Guinea. The charge resulted from a reduction in probable reserves of approximately 12% of total field reserves, as well as the additional development costs of producing these reserves over a longer field life. Fair value was determined by discounting anticipated future net cash flows. Dis- counted cash flows were less than the book value of the field, which included allocated purchase price from the Triton acquisition. The Corporation also recorded a pre-tax impairment charge of $318 million to reduce the carrying value of oil and gas properties located primarily in the Main Pass/Breton Sound area of the Gulf of Mexico. Most of these properties were obtained in the 2001 LLOG acquisi- tion and consisted of producing oil and gas fields with proved and probable reserves and exploration acreage. This charge principally reflects reduced reserve estimates on these fields resulting from unfavorable production perfor- mance. The fair values of producing properties were deter- mined by using discounted cash flows. Exploration properties were evaluated by using results of drilling and production data from nearby fields and seismic data for these and other properties in the area. The pre-tax amounts of these charges were recorded in the caption asset impair- ments in the income statement. 

During 2002, the Corporation completed the sale of six United States flag vessels for $161 million in cash and a note for $29 million. The sale resulted in a pre-tax gain of $102 million. The Corporation has agreed to support the buyer’s charter rate for these vessels for up to five years. A pre-tax gain of $50 million was deferred as part of the sale transac- 

tion to reflect potential obligations of the support agree- ment. The support agreement requires that, if the actual contracted rate for the charter of a vessel is less than the stipulated charter rate in the agreement, the Corporation pays to the buyer the difference between the contracted rate and the stipulated rate. If the actual contracted rate exceeds the stipulated rate, the buyer must apply such amount to reimburse the Corporation for any payments made by the Corporation up to that date. At January 1, 2003, the charter support reserve was $48 million. During 2003, the Corporation paid $5 million of charter support. Based on contractual long-term charter rates and estimates of future charter rates, the Corporation lowered the esti- mated charter support reserve by $11 million. While the Corporation’s eventual obligations under the support agree- ment could exceed the amount of the deferred gain, based on current estimates, the remaining amount recorded at December 31, 2003, $32 million, is appropriate. 

Pre-tax net gains of $41 million were recorded during 2002 from sales of oil and gas producing properties in the United States, United Kingdom and Azerbaijan and the Corpora- tion’s energy marketing business in the United Kingdom. 

The sale of the six United States flag vessels related to the refining and marketing segment and the remaining 2002 asset sales related to exploration and production activities. The pre-tax amounts of these asset sales are recorded in non-operating income in the income statement. 

The United Kingdom government enacted a 10% supple- mentary tax on profits from oil and gas production in 2002. As a result of this tax law change, the Corporation recorded a one-time provision for deferred taxes of $43 million to increase the deferred tax liability on its balance sheet. 

In 2002, the Corporation recorded a pre-tax charge of $22 million for the write-off of intangible assets in its U.S. energy marketing business. In addition, accrued severance of $13 million was recorded for cost reduction initiatives in refining and marketing, principally in energy marketing. Approximately 165 positions were eliminated and an office was closed. The estimated annual savings from the staff reduction is $15 million before tax. The accrued severance was paid prior to December 31, 2003. 

2001: The Corporation recorded a pre-tax charge of $29 million for estimated losses due to the bankruptcy of certain subsidiaries of Enron Corporation. The charge 

