2008 Estimates
The forward-looking statements provided in this discussion are based on our examination of historical operating trends, the information that was used to prepare the December 31, 2007 reserve reports and other data in our possession or available from third parties. These forward-looking statements were prepared assuming demand, curtailment, producibility and general market conditions for our oil, natural gas and NGLs during 2008 will be substantially similar to those of 2007, unless otherwise noted. We make reference to the "Disclosure Regarding Forward-Looking Statements" at the beginning of this report. Amounts related to Canadian operations have been converted to U.S. dollars using a projected average 2008 exchange rate of $0.98 U.S. dollar to $1.00 Canadian dollar.
In January 2007, we announced our intent to divest our West African oil and gas assets and terminate our operations in West Africa, including Equatorial Guinea, Cote d'Ivoire, Gabon and other countries in the region. In November 2007, we announced an agreement to sell our operations in Gabon for $205.5 million. We are finalizing purchase and sales agreements and obtaining the necessary partner and government approvals for the remaining properties in this divestiture package. We are optimistic we can complete these sales during the first half of 2008.
All West African related revenues, expenses and capital will be reported as discontinued operations in our 2008 financial statements. Accordingly, all forward-looking estimates in the following discussion exclude amounts related to our operations in West Africa, unless otherwise noted.
Though we have completed several major property acquisitions and dispositions in recent years, these transactions are opportunity driven. Thus, the following forward-looking estimates do not include any financial and operating effects of potential property acquisitions or divestitures that may occur during 2008, except for West Africa as previously discussed.
Oil, Gas and NGL Production
Set forth below are our estimates of oil, gas and NGL production for 2008. We estimate that our combined 2008 oil, gas and NGL production will total approximately 240 to 247 MMBoe. Of this total, approximately 92% is estimated to be produced from reserves classified as "proved" at December 31, 2007. The following estimates for oil, gas and NGL production are calculated at the midpoint of the estimated range for total production.
| Oil (MMBbls) |
Gas (Bcf) |
NGLs (MMBbls) |
Total (MMBoe) |
|||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| U.S. Onshore | 12 | 626 | 23 | 140 | ||||||||
| U.S. Offshore | 8 | 68 | 1 | 20 | ||||||||
| Canada | 23 | 198 | 4 | 60 | ||||||||
| International | 23 | 2 | — | 23 | ||||||||
| Total | 66 | 894 | 28 | 243 | ||||||||
Oil and Gas Prices
Oil and Gas Operating Area Prices
We expect our 2008 average prices for the oil and gas production from each of our operating areas to differ from the NYMEX price as set forth in the following table. These expected ranges are exclusive of the anticipated effects of the oil and gas financial contracts presented in the "Commodity Price Risk Management" section below.
The NYMEX price for oil is the monthly average of settled prices on each trading day for benchmark West Texas Intermediate crude oil delivered at Cushing, Oklahoma. The NYMEX price for gas is determined to be the first-of-month south Louisiana Henry Hub price index as published monthly in Inside FERC.
| Expected Range of Prices as a % of NYMEX Price |
||
|---|---|---|
| Oil | Gas | |
| U.S. Onshore | 85% to 95% | 80% to 90% |
| U.S. Offshore | 90% to 100% | 95% to 105% |
| Canada | 55% to 65% | 85% to 95% |
| International | 85% to 95% | 83% to 93% |
Commodity Price Risk Management
From time to time, we enter into NYMEX-related financial commodity collar and price swap contracts. Such contracts are used to manage the inherent uncertainty of future revenues due to oil and gas price volatility. Although these financial contracts do not relate to specific production from our operating areas, they will affect our overall revenues and average realized oil and gas prices in 2008.
The key terms of our 2008 oil and gas financial collar and price swap contracts are presented in the following tables. The tables include contracts entered into as of February 15, 2008.
| Oil Financial Contracts | |||||
|---|---|---|---|---|---|
| Price Collar Contracts | |||||
| Floor Price | Ceiling Price | ||||
| Period | Volume (Bbls/d) |
Floor Price ($/Bbl) |
Ceiling Range ($/Bbl) |
Weighted Average Ceiling Price ($/Bbl) |
|
| First Quarter | 21,011 | $70.00 | $132.50 - 148.00 | $140.31 | |
| Second Quarter | 22,000 | $70.00 | $132.50 - 148.00 | $140.20 | |
| Third Quarter | 22,000 | $70.00 | $132.50 - 148.00 | $140.20 | |
| Fourth Quarter | 22,000 | $70.00 | $132.50 - 148.00 | $140.20 | |
| 2008 Average | 21,754 | $70.00 | $132.50 - 148.00 | $140.23 | |
| Gas Financial Contracts | ||||||||
|---|---|---|---|---|---|---|---|---|
| Price Collar Contracts | Price Swap Contracts | |||||||
| Floor Price | Ceiling Price | |||||||
| Period | Volume (MMBtu/d) |
Floor Price ($/MMBtu) |
Ceiling Range ($/MMBtu) |
Weighted Average Ceiling Price ($/MMBtu) |
Volume (MMBtu/d) |
Weighted Average Price ($/MMBtu) |
||
| First Quarter | 634,011 | $7.50 | $9.00 - 10.25 | $9.43 | 364,670 | $8.23 | ||
| Second Quarter | 1,080,000 | $7.50 | $9.00 - 10.25 | $9.43 | 620,000 | $8.24 | ||
| Third Quarter | 1,080,000 | $7.50 | $9.00 - 10.25 | $9.43 | 620,000 | $8.24 | ||
| Fourth Quarter | 1,080,000 | $7.50 | $9.00 - 10.25 | $9.43 | 620,000 | $8.24 | ||
| 2008 Average | 969,112 | $7.50 | $9.00 - 10.25 | $9.43 | 556,516 | $8.24 | ||
To the extent that monthly NYMEX prices in 2008 differ from those established by the gas price swaps, or are outside of the ranges established by the oil and natural gas collars, we and the counterparties to the contracts will settle the difference. Such settlements will either increase or decrease our oil and gas revenues for the period. Also, we will mark-to-market the contracts based on their fair values throughout 2008. Changes in the contracts' fair values will also be recorded as increases or decreases to our oil and gas revenues. The expected ranges of our realized oil and gas prices as a percentage of NYMEX prices, which are presented earlier in this document, do not include any estimates of the impact on our oil and gas prices from monthly settlements or changes in the fair values of our oil and gas price swaps and collars.