Annual report pursuant to Section 13 and 15(d)

Oil and Gas Properties

v2.4.0.6
Oil and Gas Properties
12 Months Ended
Dec. 31, 2011
Oil and Gas Exploration and Production Industries Disclosures [Abstract]  
Oil and Gas Properties
Oil and Natural Gas Properties

The following table discloses certain financial data relating to the Company's oil and natural gas activities, all of which are located in the United States.
 
For the year ended December 31,
 
2011
 
2010
 
2009
Capitalized costs incurred:
 
 
 
 
 
    Evaluated Properties-
 
 
 
 
 
        Beginning of period balance
$
1,316,677

 
$
1,593,884

 
$
1,581,698

        Deconsolidation of Subsidiary January 1, 2010

 
(364,589
)
 

        Capitalized G&A
11,205

 
10,676

 
7,993

        Property acquisition costs

 

 
15,755

        Exploration costs
5,473

 
14,739

 

        Development costs
88,285

 
61,967

 
(11,562
)
        End of period balance
$
1,421,640

 
$
1,316,677

 
$
1,593,884

 
 
 
 
 
 
    Unevaluated Properties (excluded from amortization):
 

 
 

 
 

        Beginning of period balance
$
8,106

 
$
25,442

 
$
32,829

        Additions
3,794

 
3,561

 
6,140

        Capitalized interest
573

 
2,000

 
3,213

        Transfers to evaluated
(9,870
)
 
(22,897
)
 
(16,740
)
        End of period balance
$
2,603

 
$
8,106

 
$
25,442

 
 
 
 
 
 
    Accumulated depreciation, depletion and amortization:
 

 
 

 
 

        Beginning of period balance
$
1,155,915

 
$
1,488,718

 
$
1,455,275

        Provision charged to expense
52,416

 
31,786

 
33,443

        Deconsolidation of Subsidiary January 1, 2010

 
(364,589
)
 

        Sale of mineral interests

 

 

        End of period balance
$
1,208,331

 
$
1,155,915

 
$
1,488,718


Unevaluated property costs, primarily including lease acquisition costs incurred at federal and state lease sales, unevaluated drilling costs, seismic, capitalized interest and certain overhead costs related to exploration and development being excluded from the amortizable evaluated property base, consisted of $841 incurred in 2011 and $1,762 in 2010.  These costs are directly related to the acquisition and evaluation of unproved properties and major development projects.  The excluded costs and related reserves are included in the amortization base as the properties are evaluated and proved reserves are established or impairment is determined.  The Company expects that the majority of these costs will be evaluated over the next three to five years.  The Company’s unevaluated property balance, which primarily relates to the Company’s Federal onshore property prospect lease, decreased by $5,503 to $2,603 at December 31, 2011 compared to December 31, 2010. The decrease primarily related to the write-off of leases, primarily in the Gulf of Mexico shelf region, that the Company elected not to renew.

Depletion per unit-of-production (Boe) amounted to $26.42, $19.00 and $16.98 for the years ended December 31, 2011, 2010, and 2009, respectively.  Lease operating expense, or production costs, per unit-of-production (Boe) amounted to $11.04, $10.58, and $9.37 for the years ended December 31, 2011, 2010, and 2009, respectively.

Under the full-cost accounting rules of the SEC, the Company reviews the carrying value of its proved oil and natural gas properties each quarter.  Under these rules, capitalized costs of oil and natural gas properties, net of accumulated depreciation, depletion and amortization and deferred income taxes, may not exceed the present value of estimated future net cash flows from proved oil and natural gas reserves, discounted at 10%, plus the lower of cost or fair value of unevaluated properties, net of related tax effects (the full-cost ceiling amount).  These rules generally require pricing based on the preceding 12-months’ average oil and natural gas prices based on closing prices on the first day of each month and require a write-down if the “ceiling” is exceeded.  Given the volatility of oil and natural gas prices, it is reasonably possible that the Company’s estimate of discounted future net cash flows from proved oil and natural gas reserves could change in the near term.  If oil and natural gas prices decline significantly, even if only for a short period of time, it is possible that write-downs of oil and natural gas properties could occur in the future.  For the years ended December 31, 2011, 2010, and 2009, the Company recorded no impairment charges related to its oil and natural gas properties as a result of this calculation.