Development and Exploration
We expect to continue growing reserves and production through the long-term development of our
existing project inventory in each of our primary operating areas and by building future development
projects through exploration primarily in the Gulf of Mexico, California and liquids rich resource plays
such as the Eagle Ford Shale. To implement our development and exploration plan, we will focus on:
• allocating investment capital prudently after rigorous evaluation to projects with the best
economic returns;
• optimizing production practices;
• reducing drilling and production costs;
• realigning and expanding injection processes;
• performing stimulations, recompletions, artificial lift upgrades and other operating margin and
reserve enhancements;
• focusing geophysical and geological talent;
• employing modern seismic applications;
• establishing land and prospect inventory practices to reduce costs; and
• using new technology applications in drilling and completion practices.
By implementing our development and exploration plan, we seek to add to and enhance our
proved reserves and thereby increase cash flows and enhance the value of our asset base. During the
three-year period ended December 31, 2011, our additions to proved reserves from extensions and
discoveries totaled 210 MMBOE. During this period, we incurred aggregate oil and gas development
and exploration costs of $4.5 billion.
Our 2012 capital budget is approximately $1.6 billion, including capitalized interest and general
and administrative expenses, and is focused on our major development and exploration areas. Our
resources will be primarily directed to the Eagle Ford Shale, California, Gulf of Mexico and the
Haynesville Shale. We continue to aggressively manage our inventory, our cost structure and our
financial flexibility.
Description of Properties
Our oil and gas operations are concentrated onshore California, offshore California, the Gulf Coast
Region, the Gulf of Mexico and the Rocky Mountains. Assets in our principal focus areas include
mature properties with long-lived reserves and significant development opportunities, as well as newer
properties with development and exploration potential.
Our capital investments are allocated to asset areas with the greatest expected returns and
highest growth prospects. These investments support a diversified growth strategy with sustained
development of our base properties in California, the Eagle Ford Shale, the Gulf of Mexico and the
Haynesville Shale. Also, we have continued exploration primarily in the Gulf of Mexico, California and
liquids rich resource plays such as the Eagle Ford Shale. Capital additions to our oil and gas properties
were $1.9 billion in 2011.
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