Company: ZNOG
Filing Date: 2025-03-27
Form Type: 10-K
Source: 0001437749-25-009623
Chunk: 790

Company: ZION OIL & GAS INC
Filing Date: 2025-03-27
Form: 10-K
Item: Item 2
Chunk 790
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 with which the Company  may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. All transactions with related parties are recorded at fair value of the goods or services exchanged.
    
   Zion did not have any related party transactions for the fiscal years ending  December 2024 and 2023.
    
   P. Depreciation and Accounting for Drilling Rig and Related Equipment  
    
   Zion purchased an onshore oil and gas drilling rig, drilling pipe, related equipment and spare parts for a purchase price of $5.6 million in cash, inclusive of approximately $540,000 allocated to spare parts and $48,000 allocated to additional separate assets. The value of the spare parts and separate assets are captured in separate ledger accounts, but reported as one line item with the drilling rig on the balance sheet. Zion determined that the life of the I-35 drilling rig (the rig Zion purchased), is 10 years. Zion is depreciating the rig on a straight-line basis.
    
   Zion uses the First In First Out (“FIFO”) method of accounting for the inventory spare parts, meaning that the earliest items purchased will be the first item charged to the well in which the inventory of spare parts gets consumed.
    
   It is also noteworthy that various components and systems on the rig will be subject to certifications by the manufacturer to ensure that the rig is maintained at optimal levels. Per standard practice in upstream oil and gas, each certification performed on our drilling rig increases the useful life of the rig by five years. The costs of each certification will be added to the drilling rig account, and our straight-line amortization will be adjusted accordingly.
    
   Zion purchased rig spare parts totaling approximately $178,000 and nil during the years ending  December 31, 2024 and 2023, respectively, in preparation for its MJ-01 re-entry project.
    
   Zion sold some excess scrap drilling pipe and accessories for approximately $35,000 to a local Israeli party during the year 2024. This transaction triggered a reduction in Other Drilling Assets, an accumulated depreciation adjustment and a loss on the disposal.

        F-
       13

        Zion Oil & Gas, Inc.

        Notes to Consolidated Financial Statements

   Note 2 - Summary of Significant Accounting Policies (cont’d)
    
   I-35 Drilling Rig & Associated Equipment