In 2010, we had a total of 77 MMBOE of extensions and discoveries, including 54 MMBOE in the
Haynesville Shale resulting from successful drilling during 2010 that extended and developed our
proved acreage and 17 MMBOE in the Panhandle resulting from successful horizontal development of
the Granite/Atoka Wash. Positive revisions of 20 MMBOE primarily related to higher realized oil and
gas prices and proved reserve additions in the Eagle Ford Shale were 1 MMBOE. The divestment of
our Gulf of Mexico shallow water shelf properties resulted in a 9 MMBOE reduction.
During the three-year period ended December 31, 2011, we participated in 977 exploratory wells,
of which 960 were successful, and 420 development wells, of which 416 were successful. During this
period, we incurred aggregate oil and gas acquisition, exploration and development costs of
$6.4 billion, approximately half of which was for acquisition and development activities. During this
period, proved reserve additions from acquisitions, extensions and discoveries totaled 217 MMBOE.
All of our proved undeveloped reserves are scheduled for development within five years. As of
December 31, 2011, we had proved undeveloped reserves of 184 MMBOE, a net increase of 5
MMBOE relative to December 31, 2010. Additions to proved undeveloped reserves resulted primarily
from continued successful development of our Lucius oil field, Arroyo Grande and the Eagle Ford
Shale. During 2011, we invested $316.2 million and converted 29 MMBOE, or 16% of our year-end
2010 proved undeveloped reserve balance, to proved developed. The pace of development was
heavily influenced by the large number of unproved locations that were drilled on our Haynesville Shale
and Eagle Ford Shale acreage in order to capture our significant leasehold on a held by production
basis.
There are numerous uncertainties inherent in estimating quantities and values of proved reserves,
and in projecting future rates of production and timing of development expenditures. Many of the
factors that impact these estimates are beyond our control. Reservoir engineering is a subjective
process of estimating the recovery from underground accumulations of oil and gas that cannot be
measured in an exact manner and the accuracy of any reserve estimate is a function of the quality of
available data, engineering and geological interpretation and judgment. Because all reserve estimates
are to some degree subjective, the quantities of oil and gas that are ultimately recovered, production
and operating costs, the amount and timing of future development expenditures and future oil and gas
sales prices may all differ from those assumed in these estimates. In addition, different reserve
engineers may make different estimates of reserve quantities and cash flows based upon the same
available data. Therefore, the standardized measure shown above represents estimates only and
should not be construed as the current market value of the estimated oil and gas reserves attributable
to our properties.
Probable reserves are additional reserves that are less certain to be recovered than proved
reserves, but which, together with proved reserves, are as likely as not to be recovered. In addition to
the uncertainties inherent in estimating quantities and values of proved reserves, probable reserves
may be assigned to areas where data control or interpretations of available data are less certain and
are structurally higher than proved reserves if they are adjacent to the proved reservoirs. See Item 1A
– Risk Factors –
Estimates of oil and gas reserves depend on many assumptions that may be
inaccurate. Any material inaccuracies could adversely affect the quantity and value of our oil and gas
reserves.
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