Standardized Measure of Discounted Future Net Cash Flows (unaudited)
The Standardized Measure of discounted future net cash flows relating to proved crude oil and
natural gas reserves is presented below (in thousands):
December 31,
2011
2010
2009
Consolidated entities
Future cash inflows . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 29,502,864 $ 21,151,315 $ 14,623,292
Future development costs . . . . . . . . . . . . . . . . . . . . .
(4,017,365)
(3,290,657)
(2,371,383)
Future production expense . . . . . . . . . . . . . . . . . . . .
(9,543,319)
(7,919,772)
(6,187,933)
Future income tax expense . . . . . . . . . . . . . . . . . . . .
(4,999,822)
(3,197,758)
(1,521,281)
Future net cash flows . . . . . . . . . . . . . . . . . . . . . . . . . 10,942,358
6,743,128
4,542,695
Discounted at 10% per year . . . . . . . . . . . . . . . . . . . .
(5,808,177)
(3,649,993)
(2,317,856)
Standardized measure of discounted
future net cash flows . . . . . . . . . . . . . . . . . . . . . . . $ 5,134,181 $ 3,093,135 $ 2,224,839
Entity’s share of equity investee
(1)
Future cash inflows . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 716,829 $ 656,020
Future development costs . . . . . . . . . . . . . . . . . . . . .
(168,966)
(192,889)
Future production expense . . . . . . . . . . . . . . . . . . . .
(179,155)
(165,640)
Future income tax expense . . . . . . . . . . . . . . . . . . . .
-
-
Future net cash flows . . . . . . . . . . . . . . . . . . . . . . . . .
368,708
297,491
Discounted at 10% per year . . . . . . . . . . . . . . . . . . . .
(106,797)
(86,593)
Standardized measure of discounted
future net cash flows . . . . . . . . . . . . . . . . . . . . . . . . $ 261,911 $ 210,898
(1) Amounts relate to our equity investment in McMoRan acquired on December 30, 2010.
The Standardized Measure of Discounted Future Net Cash Flows (discounted at 10%) from
production of proved reserves was developed as follows:
1. An estimate was made of the quantity of proved reserves and the future periods in which they
are expected to be produced based on year-end economic conditions.
2. In accordance with SEC guidelines, the engineers’ estimates of future net revenues from our
proved properties and the present value thereof are made using the twelve-month average of the
first-day-of-the-month reference prices as adjusted for location and quality differentials. These
prices are held constant throughout the life of the properties, except where such guidelines permit
alternate treatment, including the use of fixed and determinable contractual price escalations. We
use various derivative instruments to manage our exposure to commodity prices. Arrangements in
effect at December 31, 2011 are discussed in Note 6 – Commodity Derivative Contracts. The
derivative instruments we have in place are not classified as hedges for accounting purposes. The
realized sales prices used in the reserve reports as of December 31, 2011, 2010 and 2009 were
$104.59, $72.83 and $54.38 per barrel of oil, respectively, and $4.08, $4.29 and $3.53 per Mcf of
gas, respectively.
3. The future gross revenue streams were reduced by estimated future operating costs (including
production and ad valorem taxes) and future development and abandonment costs, all of which
were based on current costs in effect at December 31 of the year presented and held constant
throughout the life of the properties.
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