Income taxes.
Our 2011 income tax expense was $134.3 million, reflecting an annual effective
tax rate of 39%, as compared with an income tax expense of $100.7 million and an effective tax rate of
49% for 2010. Variances in our annual effective tax rate from the 35% federal statutory for 2011
resulted primarily from the tax effects of permanent differences including expenses that are not
deductible because of IRS limitations, state income taxes and changes to our balance of unrecognized
tax positions. Variances in our annual effective tax rate from the 35% federal statutory rate for 2010
resulted primarily from the tax effects of permanent differences including expenses that are not
deductible because of IRS limitations, state income taxes, tax and financial reporting differences
related to non-cash compensation, changes to our balance of unrecognized tax positions and foreign
operations.
Comparison of Year Ended December 31, 2010 to Year Ended December 31, 2009
Oil and gas revenues.
Oil and gas revenues increased $0.3 billion, to $1.5 billion for 2010 from
$1.2 billion for 2009, primarily due to an $8.52 per BOE increase in average realized prices and a 7%
increase in sales volumes. Increased production from our Haynesville Shale properties is primarily
responsible for the increase in sales volumes.
Oil revenues increased $239.6 million, to $1.1 billion for 2010 from $903.1 million for 2009,
reflecting higher average realized prices ($293.5 million) partially offset by lower sales volumes ($53.9
million). Our average realized price for oil increased $16.71 per Bbl to $68.14 per Bbl for 2010 from
$51.43 per Bbl for 2009. The increase is primarily attributable to an increase in the NYMEX oil price,
which averaged $79.61 per Bbl in 2010 versus $62.09 per Bbl in 2009. Oil sales volumes decreased
2.2 MBbls per day to 45.9 MBbls per day in 2010 from 48.1 MBbls per day in 2009, primarily reflecting
decreased production from our California properties.
Gas revenues increased $117.6 million, to $399.6 million in 2010 from $282.0 million in 2009, due
to an increase in sales volumes ($74.1 million) and an increase in realized prices ($43.5 million). Gas
sales volumes increased from 207.7 MMcf per day in 2009 to 255.0 MMcf per day in 2010 primarily
reflecting increased production from our Haynesville Shale properties partially offset by decreased
production from our South Texas and Gulf Coast asset areas. Our average realized price for gas was
$4.29 per Mcf in 2010 compared to $3.72 per Mcf in 2009. Our realized price for gas increased
primarily due to an increase in the NYMEX price for natural gas ($4.38 per Mcf in 2010 versus $3.97
per Mcf in 2009).
Lease operating expenses
. Lease operating expenses increased $11.6 million, to $262.5 million
in 2010 from $250.9 million in 2009, reflecting higher costs primarily due to an increased number of
producing wells in the Haynesville Shale and higher expenditures for well workovers primarily from our
California properties. On a per unit basis, lease operating costs decreased to $8.13 per BOE in 2010
versus $8.31 per BOE in 2009.
Steam gas costs
. Steam gas costs increased $12.6 million, to $66.4 million in 2010 from
$53.8 million in 2009, primarily reflecting higher cost of gas used in steam generation. In 2010, we
burned approximately 15.7 Bcf of natural gas at a cost of approximately $4.23 per MMBtu compared to
15.1 Bcf at a cost of approximately $3.57 per MMBtu in 2009.
Electricity
. Electricity decreased $1.1 million, to $42.8 million in 2010 from $43.9 million in 2009,
primarily reflecting a decrease in rates in California. On a per unit basis, electricity was $1.33 per BOE
in 2010 and $1.45 per BOE in 2009.
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