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FORM 10-K FOR FISCAL YEAR ENDED DECEMBER 31, 2001Supplemental Information (Unaudited)
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| Total | Domestic | New Zealand | |
| ---------------------- | ---------------------- | ---------------------- | |
| December 31, 2001: | |||
| Proved oil and gas properties | $ 974,698,428 | $ 929,172,460 | $ 45,525,968 |
| Unproved oil and gas properties | 95,943,163 | 57,096,694 | 38,846,469 |
| ---------------------- | ---------------------- | ---------------------- | |
| 1,070,641,591 | 986,269,154 | 84,372,437 | |
| Accumulated depreciation, depletion, and amortization | (442,337,531) | (442,166,052) | (171,479) |
| ---------------------- | ---------------------- | ---------------------- | |
| Net capitalized costs | $ 628,304,060 | $ 544,103,102 | $ 84,200,958 |
| ============ | ============ | ============ | |
| December 31, 2000: | |||
| Proved oil and gas properties | $ 753,426,124 | $ 732,265,674 | $ 21,160,450 |
| Unproved oil and gas properties | 55,512,872 | 46,833,274 | 8,679,598 |
| ---------------------- | ---------------------- | ---------------------- | |
| 808,938,996 | 779,098,948 | 29,840,048 | |
| Accumulated depreciation, depletion, and amortization | (284,886,168) | (284,886,168) | --- |
| ---------------------- | ---------------------- | ---------------------- | |
| Net capitalized costs | $ 524,052,828 | $ 494,212,780 | $ 29,840,048 |
| ============ | ============ | ============ |
Of the $57,096,694 of domestic unproved property costs (primarily seismic and lease acquisition costs) at December 31, 2001, excluded from the amortizable base, $26,707,313 was incurred in 2001, $9,545,964 was incurred in 2000, $5,640,587 was incurred in 1999, and $15,202,830 was incurred in prior years. When we are in an active drilling mode, we evaluate the majority of these unproved costs within a two to four year time frame. In response to market conditions in 1998, we decreased our 1999 drilling expenditures when compared to prior years, which, when coupled with the $15.3 million of leasehold properties acquired in the Brookeland and Masters Creek areas in 1998, may extend the evaluation time frame of such costs. Consequently, in response to market conditions, we have decreased our 2002 drilling expenditures as well.
Of the $38,846,469 of net New Zealand unproved property costs at December 31, 2001, excluded from the amortizable base, $30,383,713 was incurred in 2001, $5,013,539 was incurred in 2000, $907,972 was incurred in 1999, and $2,541,245 was incurred in prior years. We expect to continue drilling in New Zealand to delineate our prospects there, with seven wells planned for drilling in 2002. We expect to complete our evaluation of current unevaluated costs over the next two to three years. Upon the startup of the Rimu Production Station near the end of the first quarter of 2002, $23.6 million of these unproved property costs will be moved to the proved properties classification and will begin being depreciated.
Costs Incurred. The following table sets forth costs incurred related to our oil and gas operations:
Year Ended December 31, 2001
Total Domestic New Zealand ----------------- ----------------- ------------------- Acquisition of proved properties $ 41,286,539 $ 40,491,203 $ 795,336 Lease acquisitions1 31,225,493 25,688,068 5,537,425 Exploration 41,981,536 35,944,405 6,037,131 Development 132,246,713 112,597,856 19,648,857 ----------------- ----------------- ------------------- Total acquisition, exploration, and development2 $246,740,281 $ 214,721,532 $ 32,018,749 ----------------- ----------------- ------------------- Processing plants $23,331,095 $817,454 $22,513,641 Field compression facilities 319,703 319,703 --- ----------------- ----------------- ------------------- Total plants and facilities $23,650,798 $1,137,157 $22,513,641 ----------------- ----------------- ------------------- Total costs incurred $270,391,079 $215,858,689 $54,532,390 ============ ============ ============ Year Ended December 31, 2000
Total Domestic New Zealand ----------------- ----------------- ------------------- Acquisition of proved properties $ 34,191,883 $ 34,191,883 $ --- Lease acquisitions1 20,842,103 16,315,749 4,526,354 Exploration 20,150,834 18,524,883 1,625,951 Development 104,083,409 93,931,500 10,151,909 ----------------- ----------------- ------------------- Total acquisition, exploration, and development2 $179,268,229 $ 162,964,015 $ 16,304,214 ----------------- ----------------- ------------------- Processing plants $1,819,464 $755,119 $ 1,064,345 Field compression facilities 203,789 203,789 --- ----------------- ----------------- ------------------- Total plants and facilities $2,023,253 $958,908 $1,064,345 ----------------- ----------------- ------------------- Total costs incurred $181,291,482 $163,922,923 $17,368,559 ============ ============ ============ Year Ended December 31, 1999
Total Domestic New Zealand ----------------- ----------------- ------------------- Acquisition of proved properties $ 18,526,939 $ 18,526,939 $ --- Lease acquisitions1 10,382,672 9,251,658 1,131,014 Exploration 11,019,430 5,101,330 5,918,100 Development 39,891,868 39,891,868 --- ----------------- ----------------- ------------------- Total acquisition, exploration, and development2 $ 79,820,909 $ 72,771,795 $ 7,049,114 ----------------- ----------------- ------------------- Processing plants $1,607,559 $1,607,559 $ --- Field compression facilities 171,535 171,535 --- ----------------- ----------------- ------------------- Total plants and facilities $1,779,094 $1,779,094 $ --- ----------------- ----------------- ------------------- Total costs incurred $81,600,003 $74,550,889 $7,049,114 ============ ============ ============ 1These are actual amounts as incurred by year, including both proved and unproved lease costs. The annual lease acquisition amounts added to proved oil and gas properties in 2001, 2000, and 1999 were $13,308,843, $16,791,834, and $14,389,680, respectively.
2Includes capitalized general and administrative costs directly associated with the acquisition, exploration, and development efforts of approximately $11,600,000, $10,300,000, and $8,500,000 in 2001, 2000, and 1999, respectively. In addition, total includes $6,256,222, $5,043,206, and $4,142,098 in 2001, 2000, and 1999, respectively, of capitalized interest on unproved properties.
Results of Operations. New Zealand operations began in 2001 while all our oil and gas operations in 2000 and 1999 were domestic. The following table sets forth results of our oil and gas operations:
Year Ended December 31, 2001
Total Domestic New Zealand --------------------- --------------------- --------------------- Oil and gas sales $ 181,184,635 $ 179,360,844 $ 1,823,791 Oil and gas production costs (36,719,609) (36,554,418) (165,191) Depreciation and depletion (58,589,116) (58,417,637) (171,479) Write-down of oil and gas properties (98,862,247) (98,862,247) --- --------------------- --------------------- --------------------- (12,986,337) (14,473,458) 1,487,121 Provision (benefit) for income taxes (4,647,810) (5,138,560) 490,750 --------------------- --------------------- --------------------- Results of producing activities $ (8,338,527) $ (9,334,898) $ 996,371 ============ ============ ============ Amortization per physical unit of production (equivalent Mcf of gas) $1.31 $1.32 $ 0.34 ============ ============ ============ Year Ended December 31, 2000
Total Domestic New Zealand --------------------- --------------------- --------------------- Oil and gas sales $ 189,138,947 $ 189,138,947 $ --- Oil and gas production costs (29,220,315) (29,220,315) --- Depreciation and depletion (46,849,819) (46,849,819) --- --------------------- --------------------- --------------------- 113,068,813 113,068,813 --- Provision (benefit) for income taxes 40,365,566 40,365,566 --- --------------------- --------------------- --------------------- Results of producing activities $ 72,703,247 $ 72,703,247 $ --- ============ ============ ============ Amortization per physical unit of production (equivalent Mcf of gas) $1.11 $1.11 $ --- ============ ============ ============ Year Ended December 31, 1999
Total Domestic New Zealand --------------------- --------------------- --------------------- Oil and gas sales $ 108,898,696 $ 108,898,696 $ --- Oil and gas production costs (19,645,740) (19,645,740) --- Depreciation and depletion (41,410,106) (41,410,106) --- --------------------- --------------------- --------------------- 47,842,850 47,842,850 --- Provision (benefit) for income taxes 16,792,840 16,792,840 --- --------------------- --------------------- --------------------- Results of producing activities $ 31,050,010 $ 31,050,010 $ --- ============ ============ ============ Amortization per physical unit of production (equivalent Mcf of gas) $0.97 $0.97 $ --- ============ ============ ============
Supplemental Reserve Information. The following information presents estimates of our proved oil and gas reserves. Reserves were determined by us and audited by H. J. Gruy and Associates, Inc. ("Gruy"), independent petroleum consultants. Gruy’s summary report dated February 14, 2002, is set forth as an exhibit to the Form 10-K Report for the year ended December 31, 2001, and includes definitions and assumptions that served as the basis for the audit of proved reserves and future net cash flows. Such definitions and assumptions should be referred to in connection with the following information:
Estimates of Proved Reserves Total
Domestic
New Zealand
Oil, NGL, and Oil, NGL, and Oil, NGL, and Natural Gas Condensate Natural Gas Condensate Natural Gas Condensate (Mcf) (Bbls) (Mcf) (Bbls) (Mcf) (Bbls) --------------- --------------- --------------- --------------- --------------- --------------- Proved reserves as of December 31, 19981 352,400,835 13,957,925 352,400,835 13,957,925 --- --- Revisions of previous estimates2 (31,189,450) 2,058,725 (31,189,450) 2,058,725 --- --- Purchases of minerals in place 9,159,780 1,822,858 9,159,780 1,822,858 --- --- Sales of minerals in place (3,762,799) (260,287) (3,762,799) (260,287) --- --- Extensions, discoveries, and other additions 30,107,908 5,791,966 30,107,908 5,791,966 --- --- Production3 (26,756,524) (2,564,924) (26,756,524) (2,564,924) --- --- --------------- --------------- --------------- --------------- --------------- --------------- Proved reserves as of December 31, 19991 329,959,750 20,806,263 329,959,750 20,806,263 --- --- Revisions of previous estimates2 (4,300,787) (455,606) (4,300,787) (455,606) --- --- Purchases of minerals in place 26,567,925 2,196,547 26,567,925 2,196,547 --- --- Sales of minerals in place (363,262) (76,288) (363,262) (76,288) --- --- Extensions, discoveries, and other additions 93,869,841 15,134,694 38,556,364 3,943,807 55,313,477 11,190,887 Production3 (27,119,491) (2,472,014) (27,119,491) (2,472,014) --- --- --------------- --------------- --------------- --------------- --------------- --------------- Proved reserves as of December 31, 2000 418,613,976 35,133,596 363,300,499 23,942,709 55,313,477 11,190,887 Revisions of previous estimates2 (122,127,541) 5,621,556 (101,693,477) 8,460,690 (20,434,064) (2,839,134) Purchases of minerals in place 10,038,803 7,430,591 10,038,803 7,430,591 --- --- Sales of minerals in place (7,508,064) (555,586) (7,508,064) (555,586) --- --- Extensions, discoveries, and other additions 52,353,909 8,907,852 50,810,697 6,257,441 1,543,212 2,650,411 Production3 (26,458,958) (3,055,373) (26,458,958) (2,971,112) --- (84,261) --------------- --------------- --------------- --------------- --------------- --------------- Proved reserves as of December 31, 20014 324,912,125 53,482,636 288,489,500 42,564,733 36,422,625 10,917,903 ========= ======== ========= ======== ======== ======== Proved developed reserves: December 31, 1998 197,105,963 7,142,566 197,105,963 7,142,566 --- --- December 31, 1999 174,046,096 8,437,299 174,046,096 8,437,299 --- --- December 31, 2000 215,169,833 10,980,196 215,169,833 10,980,196 --- --- December 31, 20014 181,651,578 23,759,574 167,401,736 20,393,142 14,249,842 3,366,432 1Proved reserves exclude quantities subject to our volumetric production payment agreement, which expired with the last required delivery of volumes in October 2000.
2Revisions of previous estimates are related to upward or downward variations based on current engineering information for production rates, volumetrics, and reservoir pressure. Additionally, changes in quantity estimates are affected by the increase or decrease in crude oil and natural gas prices at each year-end. Proved reserves, as of December 31, 2001, were based upon prices in effect at year-end. The weighted average of such year-end prices for total, domestic, and New Zealand were $2.51, $2.68, and $1.18 per Mcf of natural gas and $18.45, $18.51, and $18.25 per barrel of oil, respectively. This compares to $9.86, $11.25, and $0.71 per Mcf and $24.62, $25.50, and $22.30 per barrel as of December 31, 2000, for total, domestic, and New Zealand, respectively.
3Natural gas production for 1999 and 2000 excludes 728,235 and 405,130 Mcf, respectively, delivered under our volumetric production payment agreement.
4We acquired 62.1 Bcfe and 5.7 Bcfe from the TAWN and Antrim acquisitions, respectively, in New Zealand. These reserves estimates at December 31, 2001, are not included in the above table. The TAWN reserves were all proved developed while the Antrim reserves were 34% proved developed.
Standardized Measure of Discounted Future Net Cash Flows. The standardized measure of discounted future net cash flows relating to proved oil and gas reserves is as follows:
Year Ended December 31, 2001
Total Domestic New Zealand ------------------------ ------------------------ ------------------------ Future gross revenues $ 1,706,475,138 $ 1,485,480,927 $ 220,994,211 Future production costs (483,588,857) (436,141,429) (47,447,428) Future development costs (198,172,628) (185,347,628) (12,825,000) ------------------------ ------------------------ ------------------------ Future net cash flows before income taxes 1,024,713,653 863,991,870 160,721,783 Future income taxes (261,635,331) (208,726,729) (52,908,602) ------------------------ ------------------------ ------------------------ Future net cash flows after income taxes 763,078,322 655,265,141 107,813,181 Discount at 10% per annum (308,520,417) (274,882,174) (33,638,243) ------------------------ ------------------------ ------------------------ Standardized measure of discounted future net cash flows relating to proved oil and gas reserves $ 454,557,905 $ 380,382,967 $ 74,174,938 ============ ============ ============ Year Ended December 31, 2000
Total Domestic New Zealand ------------------------ ------------------------ ------------------------ Future gross revenues $ 4,995,951,799 $ 4,737,560,630 $ 258,391,169 Future production costs (817,127,348) (807,436,139) (9,691,209) Future development costs (204,620,116) (180,320,116) (24,300,000) ------------------------ ------------------------ ------------------------ Future net cash flows before income taxes 3,974,204,335 3,749,804,375 224,399,960 Future income taxes (1,321,061,952) (1,243,731,594) (77,330,358) ------------------------ ------------------------ ------------------------ Future net cash flows after income taxes 2,653,142,383 2,506,072,781 147,069,602 Discount at 10% per annum (1,075,183,917) (1,017,995,158) (57,188,759) ------------------------ ------------------------ ------------------------ Standardized measure of discounted future net cash flows relating to proved oil and gas reserves $ 1,577,958,466 $ 1,488,077,623 $ 89,880,843 ============ ============ ============ Year Ended December 31, 1999
Total Domestic New Zealand ------------------------ ------------------------ ------------------------ Future gross revenues $ 1,371,541,850 $ 1,371,541,850 $ --- Future production costs (353,594,258) (353,594,258) --- Future development costs (156,738,446) (156,738,446) --- ------------------------ ------------------------ ------------------------ Future net cash flows before income taxes 861,209,146 861,209,146 --- Future income taxes (226,725,033) (226,725,033) --- ------------------------ ------------------------ ------------------------ Future net cash flows after income taxes 634,484,113 634,484,113 --- Discount at 10% per annum (195,540,279) (195,540,279) --- ------------------------ ------------------------ ------------------------ Standardized measure of discounted future net cash flows relating to proved oil and gas reserves $ 438,943,834 $ 438,943,834 $ --- ============ ============ ============
The standardized measure of discounted future net cash flows from production of proved reserves was developed as follows:
1. Estimates are made of quantities of proved reserves and the future periods during which they are expected to be produced based on year-end economic conditions.
2. The estimated future gross revenues of proved reserves are priced on the basis of year-end prices, except in those instances where fixed and determinable gas price escalations are covered by contracts limited to the price we reasonably expect to receive.
3. The future gross revenue streams are reduced by estimated future costs to develop and to produce the proved reserves, as well as certain abandonment costs based on year-end cost estimates and the estimated effect of future income taxes.
4. Future income taxes are computed by applying the statutory tax rate to future net cash flows reduced by the tax basis of the properties, the estimated permanent differences applicable to future oil and gas producing activities, and tax carry forwards.
The estimates of cash flows and reserves quantities shown above are based on year-end oil and gas prices for each period. Subsequent changes to such year-end oil and gas prices could have a significant impact on discounted future net cash flows. Under Securities and Exchange Commission rules, companies that follow the full-cost accounting method are required to make quarterly Ceiling Test calculations, using prices in effect as of the period end date presented (see Note 1 to the Consolidated Financial Statements). Application of these rules during periods of relatively low oil and gas prices, even if of short-term seasonal duration, may result in write-downs.
The standardized measure of discounted future net cash flows is not intended to present the fair market value of our oil and gas property reserves. An estimate of fair value would also take into account, among other things, the recovery of reserves in excess of proved reserves, anticipated future changes in prices and costs, an allowance for return on investment, and the risks inherent in reserves estimates.
The following are the principal sources of change in the standardized measure of discounted future net cash flows:
Year Ended December 31,
2001 2000 1999 ------------------------ ------------------------ ------------------------ Beginning balance $ 1,577,958,466) $ 438,943,834 $ 290,273,103 ------------------------ ------------------------ ------------------------ Revisions to reserves proved in prior years-- Net changes in prices, production costs, and future development costs (1,692,627,074) 1,523,487,598 123,447,890 Net changes due to revisions in quantity estimates (93,669,181) (36,102,814) (23,746,974) Accretion of discount 231,325,481 56,405,451 34,078,501 Other (204,768,815) (220,119,873) 2,032,696 ------------------------ ------------------------ ------------------------ Total revisions (1,759,739,589) 1,323,670,362 135,812,113 New field discoveries and extensions, net of future production and development costs 110,213,160 359,265,150 102,582,467 Purchases of minerals in place 39,544,163 160,240,785 39,282,292 Sales of minerals in place (50,131,970) (598,021) (5,360,428) Sales of oil and gas produced, net of production costs (144,262,145) (159,331,003) (88,196,672) Previously estimated development costs incurred 94,107,760 65,953,028 39,149,732 Net change in income taxes 586,868,060 (610,185,669) (74,598,773) ------------------------ ------------------------ ------------------------ Net change in standardized measure of discounted future net cash flows (1,123,400,561) 1,139,014,632 148,670,731 ------------------------ ------------------------ ------------------------ Ending balance $454,557,905 $1,577,958,466 $ 438,943,834 ============ ============ ============
Quarterly Results. The following table presents summarized quarterly financial information for the years ended December 31, 2000 and 2001:
Basic EPS Diluted EPS Income/(Loss) Income/(Loss) Income/(Loss) Before Before Before Extraordinary Extraordinary Extraordinary Item and Item and Item and Basic EPS Diluted EPS Income/(Loss) Change in Net Change in Change in Net Net Before Accounting Income/ Accounting Accounting Income/ Income/ Revenues Income Taxes Principle (Loss) Principle Principle (Loss) (Loss) ----------------- ------------------- ------------------- ----------------- ----------------- ---------------- ------------ -------------- 2000: First Quarter