4. Future income taxes were calculated by applying the statutory federal and state income tax rate
to pre-tax future net cash flows, net of the tax basis of the properties involved and utilization of
available tax carryforwards related to oil and gas operations.
The principal sources of changes in the Standardized Measure of the Future Net Cash Flows for
the three years ended December 31, 2011, are as follows (in thousands):
December 31,
2011
2010
2009
Consolidated entities
Balance, beginning of year
(1)
. . . . . . . . . . . . . . . . . . . $ 3,093,135 $ 2,224,839 $ 1,136,374
Sales, net of production expenses . . . . . . . . . . . . . . .
(1,397,901)
(1,090,465)
(761,157)
Net change in sales and transfer prices, net of
production expenses . . . . . . . . . . . . . . . . . . . . . . . . 3,085,916 2,030,484
1,568,827
Extensions, discoveries and improved recovery, net
of costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
959,491
410,973
87,890
Changes in estimated future development costs . . . .
(167,533)
(335,614)
(163,602)
Previously estimated development costs incurred
during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
454,778
267,719
144,017
Purchase of reserves in-place . . . . . . . . . . . . . . . . . .
82,418
41,214
3,198
Sale of reserves in-place . . . . . . . . . . . . . . . . . . . . . . .
(594,299)
(120,082)
-
Revision of quantity estimates . . . . . . . . . . . . . . . . . .
38,352
338,683
443,344
Accretion of discount . . . . . . . . . . . . . . . . . . . . . . . . . .
420,957
273,259
188,134
Net change in income taxes . . . . . . . . . . . . . . . . . . . .
(841,133)
(947,875)
(422,186)
Balance, end of year . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,134,181 $ 3,093,135 $ 2,224,839
Entity’s share of equity investee
(2)
Balance, beginning of year . . . . . . . . . . . . . . . . . . . . . $ 205,691
Sales, net of production expenses . . . . . . . . . . . . . . .
(105,965)
Changes in prices . . . . . . . . . . . . . . . . . . . . . . . . . . . .
46,514
Discoveries and extensions, less related costs . . . . .
1,881
Changes in estimated future development costs
and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(34,060)
Previously estimated development costs incurred
during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
65,651
Purchase of reserves in-place . . . . . . . . . . . . . . . . . .
-
Sale of reserves in-place . . . . . . . . . . . . . . . . . . . . . . .
-
Revision of quantity estimates . . . . . . . . . . . . . . . . . .
61,630
Accretion of discount . . . . . . . . . . . . . . . . . . . . . . . . . .
20,569
Net change in income taxes . . . . . . . . . . . . . . . . . . . .
-
Balance, end of year . . . . . . . . . . . . . . . . . . . . . . . . . . $ 261,911
(1) Reserve estimates as of January 1, 2009 are calculated using year-end reference prices adjusted for location and quality
differentials as required by the SEC reporting rules at December 31, 2008.
(2) Amounts relate to our equity investment in McMoRan acquired on December 30, 2010. Our proportionate share of
McMoRan’s changes in the standardized measure for the year ended December 31, 2010 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 change in the
standardized measure.
F-62