factors. Costs not subject to amortization consist primarily of capital costs incurred for undeveloped
acreage and wells in progress pending determination, together with capitalized interest costs for these
projects. Due to the nature of the reserves, the ultimate evaluation of the properties will occur over a
period of several years. We expect that 57% of the costs not subject to amortization at December 31,
2011 will be transferred to the amortization base over the next five years and the remainder in the next
seven to ten years.
Approximately 21% of our total net undeveloped acreage is covered by leases that will expire from
2012 to 2014. In 2008 and 2010, we added a significant number of new leases in the Haynesville
Shale and the Eagle Ford Shale, respectively, with lease terms generally ranging from two to three
years. Over 85% of our acreage in the Haynesville Shale and over 25% of our acreage in the Eagle
Ford Shale is currently held by production or held by operations and future plans include drilling or
extending leases on our remaining acreage.
During the third quarter of 2011, we determined not to develop the Friesian prospect and the lease
terminated by its terms. The accumulated costs of approximately $460 million associated with the
project were transferred to the full cost pool.
Results of Operations for Oil and Gas Producing Activities
The results of operations from oil and gas producing activities below exclude non-oil and gas
revenues, general and administrative expenses, interest charges and interest income. Income tax
expense was determined by applying the statutory rates to pre-tax operating results (in thousands):
Year Ended December 31,
2011
2010
2009
Consolidated entities
Revenues from oil and gas producing activities . . . . . . . . . . . . . . . . . . . $1,964,488 $1,544,595 $1,187,130
Production costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(558,240)
(447,772)
(426,103)
Depreciation, depletion, amortization and accretion . . . . . . . . . . . . . . . .
(664,892)
(535,239)
(405,597)
Impairment of oil and gas properties . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-
(59,475)
-
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(277,860)
(188,190)
(133,464)
Results of operations from producing activities for consolidated
entities (excluding general and administrative and interest costs) . . $ 463,496 $ 313,919 $ 221,966
Entity’s share of equity investee
(1)
Revenues from oil and gas producing activities . . . . . . . . . . . . . . . . . . . $ 171,370
Production and delivery costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(65,197)
Exploration expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(25,830)
Depreciation, depletion, amortization and accretion . . . . . . . . . . . . . . .
(74,820)
Impairment of oil and gas properties . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(22,477)
Insurance recoveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
28,780
Gain on sale of oil and gas properties . . . . . . . . . . . . . . . . . . . . . . . . . .
284
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-
Results of operations from producing activities for equity investee
(excluding general and administrative and interest costs) . . . . . . . . $ 12,110
(1) Amounts relate to our equity investment in McMoRan acquired on December 30, 2010. We completed the divestment of our
Gulf of Mexico shallow water properties on December 30, 2010. Our proportionate share of McMoRan’s 2010 results of
operations is not presented because it is insignificant as PXP owned the investment for one day and it is not practicable to
determine one day’s results of operations.
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