Reliable technology.
Reliable technology is a grouping of one or more technologies (including
computational methods) that has been field tested and has been demonstrated to provide reasonably
certain results with consistency and repeatability in the formation being evaluated or in an analogous
formation.
Reserves.
Reserves are estimated remaining quantities of oil and gas and related substances
anticipated to be economically producible, as of a given date, by application of development projects to
known accumulations. In addition, there must exist, or there must be a reasonable expectation that
there will exist, the legal right to produce or a revenue interest in the production, installed means of
delivering oil and gas or related substances to market and all permits and financing required to
implement the project. Reserves should not be assigned to adjacent reservoirs isolated by major,
potentially sealing, faults until those reservoirs are penetrated and evaluated as economically
producible. Reserves should not be assigned to areas that are clearly separated from a known
accumulation by a non-productive reservoir (i.e., absence of reservoir, structurally low reservoir or
negative test results). Such areas may contain prospective resources (i.e., potentially recoverable
resources from undiscovered accumulations).
Reserve life.
A measure of the productive life of an oil and gas property or a group of properties,
expressed in years. Reserve life is calculated by dividing proved reserve volumes at year-end by
production volumes. In our calculation of reserve life, production volumes are based on annualized
fourth quarter production and are adjusted, if necessary, to reflect property acquisitions and
dispositions.
Resources.
Resources are quantities of oil and gas estimated to exist in naturally occurring
accumulations. A portion of the resources may be estimated to be recoverable and another portion
may be considered unrecoverable. Resources include both discovered and undiscovered
accumulations.
Royalty interest.
An interest in an oil and gas lease that gives the owner of the interest the right to
receive a portion of the production from the leased acreage (or of the proceeds of the sale thereof), but
generally does not require the owner to pay any portion of the costs of drilling or operating the wells on
the leased acreage. Royalties may be either landowner’s royalties, which are reserved by the owner of
the leased acreage at the time the lease is granted, or overriding royalties, which are usually reserved
by an owner of the leasehold in connection with a transfer to a subsequent owner.
Standardized measure.
The present value, discounted at 10% per year, of estimated future net
revenues from the production of proved reserves, computed by applying sales prices used in
estimating proved oil and gas reserves to the year-end quantities of those reserves in effect as of the
dates of such estimates and held constant throughout the productive life of the reserves (except for
consideration of future price changes to the extent provided by contractual arrangements in existence
at year-end), and deducting the estimated future costs to be incurred in developing, producing and
abandoning the proved reserves (computed based on year-end costs and assuming continuation of
existing economic conditions). Future income taxes are calculated by applying the appropriate
year-end statutory federal and state income tax rate, with consideration of future tax rates already
legislated, to pre-tax future net cash flows, net of the tax basis of the properties involved and utilization
of available tax carryforwards related to proved oil and gas reserves.
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