Standardized Measure of Discounted Future Net Cash Flows
The tables below reflect the standardized measure of discounted future net continuing cash flows relating to Devon's interest in proved reserves:
| Total | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Year Ended December 31, | |||||||||
| 2007 | 2006 | 2005 | |||||||
| (In millions) | |||||||||
| Future cash inflows | $ | 111,156 | 77,951 | 89,144 | |||||
|
Future costs: Development |
(9,974 | ) | (8,116 | ) | (5,488 | ) | |||
| Production | (39,047 | ) | (28,537 | ) | (24,296 | ) | |||
| Future income tax expense | (17,752 | ) | (12,241 | ) | (19,773 | ) | |||
| Future net cash flows | 44,383 | 29,057 | 39,587 | ||||||
| 10% discount to reflect timing of cash flows | (20,912 | ) | (13,428 | ) | (17,958 | ) | |||
| Standardized measure of discounted future net cash flows | $ | 23,471 | 15,629 | 21,629 | |||||
| Domestic | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Year Ended December 31, | |||||||||
| 2007 | 2006 | 2005 | |||||||
| (In millions) | |||||||||
| Future cash inflows | $ | 72,109 | 47,980 | 55,954 | |||||
|
Future costs: Development |
(5,673 | ) | (4,919 | ) | (2,954 | ) | |||
| Production | (25,112 | ) | (18,858 | ) | (16,213 | ) | |||
| Future income tax expense | (12,526 | ) | (7,588 | ) | (12,582 | ) | |||
| Future net cash flows | 28,798 | 16,615 | 24,205 | ||||||
| 10% discount to reflect timing of cash flows | (14,119 | ) | (7,938 | ) | (11,258 | ) | |||
| Standardized measure of discounted future net cash flows | $ | 14,679 | 8,677 | 12,947 | |||||
| Canada | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Year Ended December 31, | |||||||||
| 2007 | 2006 | 2005 | |||||||
| (In millions) | |||||||||
| Future cash inflows | $ | 28,684 | 22,575 | 26,277 | |||||
|
Future costs: Development |
(3,380 | ) | (2,395 | ) | (1,984 | ) | |||
| Production | (10,331 | ) | (7,431 | ) | (6,344 | ) | |||
| Future income tax expense | (3,729 | ) | (3,614 | ) | (5,986 | ) | |||
| Future net cash flows | 11,244 | 9,135 | 11,963 | ||||||
| 10% discount to reflect timing of cash flows | (5,282 | ) | (4,318 | ) | (5,332 | ) | |||
| Standardized measure of discounted future net cash flows | $ | 5,962 | 4,817 | 6,631 | |||||
| International | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Year Ended December 31, | |||||||||
| 2007 | 2006 | 2005 | |||||||
| (In millions) | |||||||||
| Future cash inflows | $ | 10,363 | 7,396 | 6,913 | |||||
|
Future costs: Development |
(921 | ) | (802 | ) | (550 | ) | |||
| Production | (3,604 | ) | (2,248 | ) | (1,739 | ) | |||
| Future income tax expense | (1,497 | ) | (1,039 | ) | (1,205 | ) | |||
| Future net cash flows | 4,341 | 3,307 | 3,419 | ||||||
| 10% discount to reflect timing of cash flows | (1,511 | ) | (1,172 | ) | (1,368 | ) | |||
| Standardized measure of discounted future net cash flows | $ | 2,830 | 2,135 | 2,051 | |||||
Future cash inflows are computed by applying year-end prices (averaging $60.42 per barrel of oil, $6.01 per Mcf of gas and $50.57 per barrel of natural gas liquids at December 31, 2007) to the year-end quantities of proved reserves, except in those instances where fixed and determinable price changes are provided by contractual arrangements in existence at year-end.
Future development and production costs are computed by estimating the expenditures to be incurred in developing and producing proved oil and gas reserves at the end of the year, based on year-end costs and assuming continuation of existing economic conditions. Of the $10.0 billion of future development costs as of the end of 2007, $1.9 billion, $1.6 billion and $1.3 billion are estimated to be spent in 2008, 2009 and 2010, respectively.
Future development costs include not only development costs, but also future dismantlement, abandonment and rehabilitation costs. Included as part of the $10.0 billion of future development costs are $2.1 billion of future dismantlement, abandonment and rehabilitation costs.
Future production costs include general and administrative expenses directly related to oil and gas producing activities. Future income tax expenses are computed by applying the appropriate statutory tax rates to the future pre-tax net cash flows relating to proved reserves, net of the tax basis of the properties involved. The future income tax expenses give effect to permanent differences and tax credits, but do not reflect the impact of future operations.
Changes Relating to the Standardized Measure of Discounted Future Net Cash Flows
Principal changes in the standardized measure of discounted future net continuing cash flows attributable to Devon's proved reserves are as follows:
| Year Ended December 31, | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| 2007 | 2006 | 2005 | |||||||
| (In millions) | |||||||||
| Beginning balance | $ | 15,629 | 21,629 | 14,530 | |||||
| Oil, gas and NGL sales, net of production costs | (7,233 | ) | (6,174 | ) | (6,551 | ) | |||
| Net changes in prices and production costs | 9,582 | (10,439 | ) | 10,606 | |||||
| Extensions and discoveries, net of future development costs | 4,131 | 4,553 | 6,074 | ||||||
| Purchase of reserves, net of future development costs | 51 | 786 | 67 | ||||||
| Development costs incurred during the period that reduced future development costs |
1,887 | 1,466 | 606 | ||||||
| Revisions of quantity estimates | 566 | (2,201 | ) | (610 | ) | ||||
| Sales of reserves in place | (50 | ) | (10 | ) | (2,897 | ) | |||
| Accretion of discount | 2,214 | 3,234 | 2,096 | ||||||
| Net change in income taxes | (2,863 | ) | 4,202 | (4,301 | ) | ||||
| Other, primarily changes in timing and foreign exchange rates | (443 | ) | (1,417 | ) | 2,009 | ||||
| Ending balance | $ | 23,471 | 15,629 | 21,629 | |||||