Costs Incurred. The following table sets forth costs incurred related to our oil and gas operations:

		Year Ended December 31, 2006
	Total			Domestic			New Zealand
Acquisition of proved and unproved properties	$	212,499,280		$	212,499,280		$	--
Lease acquisitions and prospect costs(1)		79,183,368			68,594,051			10,589,317
Exploration		29,285,958			13,224,894			16,061,064
Development(2)		261,142,220			231,085,290			30,056,930
		---------------------			---------------------			---------------------
Total acquisition, exploration, and development (3,4)	$	582,110,826		$	525,403,515		$	56,707,311
		=============			=============			=============

 

		Year Ended December 31, 2005
	Total			Domestic			New Zealand
Acquisition of proved and unproved properties	$	31,429,343		$	31,429,343		$	--
Lease acquisitions and prospect costs(1)		41,397,277			34,502,163			6,895,114
Exploration		52,350,339			38,424,995			13,925,344
Development(2)		141,081,231			111,057,945			30,023,286
		---------------------			---------------------			---------------------
Total acquisition, exploration, and development (3,4)	$	266,258,190		$	215,414,446		$	50,843,744
		=============			=============			=============

 

		Year Ended December 31, 2004
	Total			Domestic			New Zealand
Acquisition of proved and unproved properties	$	31,771,094		$	31,771,094		$	--
Lease acquisitions and prospect costs(1)		34,545,393			27,713,059			6,832,334
Exploration		17,430,265			16,714,982			715,283
Development(2)		108,259,091			79,338,697			28,920,394
		---------------------			---------------------			---------------------
Total acquisition, exploration, and development (3,4)	$	192,005,843		$	155,537,832		$	36,468,011
		=============			=============			=============

(1)These 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 2006, 2005, and 2004 were $70.5 million, $30.4 million, and $17.8 million, respectively. Domestic costs for seismic data acquisition, included above, were $23.1 million, 4.2 million, and $1.0 million in 2006, 2005 and 2004, respectively. New Zealand costs for seismic data acquisition, included above were $3.8 million in 2006.

(2)Facility construction costs and capital costs have been included in development costs, and totaled $16.5 million, $26.9 million, and $12.6 million for the years ended December 31, 2006, 2005 and 2004.

(3)Includes capitalized general and administrative costs directly associated with the acquisition, exploration, and development efforts of approximately $28.3 million, $18.8 million, and $13.1 million in 2006, 2005, and 2004, respectively. In addition, total includes $9.2 million, $7.2 million, and $6.5 million in 2006, 2005, and 2004, respectively, of capitalized interest on unproved properties.

(4)Asset retirement obligations incurred have been included in exploration, development and acquisition costs as applicable for the years ended December 31, 2006, 2005, and 2004.

 

Results of Operations. 

 

	Year Ended December 31, 2006
	Total			Domestic			New Zealand
Oil and gas sales	$	601,551,368		$	537,512,509		$	64,038,859
Lease operating cost		(62,474,619)			(49,948,039)			(12,526,580)
Severance and other taxes		(65,452,043)			(61,234,906)			(4,217,137)
Depreciation, depletion, and amortization		(166,518,190)			(136,826,013)			(29,692,177)
Accretion of asset retirement obligation		(1,034,322)			(884,105)			(150,217)
		------------------			------------------			------------------
		306,072,194			288,619,446			17,452,748
Provision for income taxes		117,531,722			110,829,867			6,701,855
		------------------			------------------			------------------
Results of producing activities	$	188,540,472		$	177,789,579		$	10,750,893
		===========			===========			===========
Amortization per physical unit of production
(equivalent Mcf of gas)	$	2.37		$	2.41		$	2.20
		===========			===========			===========

 

	Year Ended December 31, 2005
	Total			Domestic			New Zealand
Oil and gas sales	$	423,766,245		$	355,872,616		$	67,893,629
Lease operating cost		(47,321,841)			(34,941,430)			(12,380,411)
Severance and other taxes		(42,176,505)			(37,805,742)			(4,370,763)
Depreciation, depletion, and amortization		(106,037,775)			(79,926,245)			(26,111,530)
Accretion of asset retirement obligation		(761,042)			(626,134)			(134,908)
		------------------			------------------			------------------
		227,469,082			202,573,065			24,896,017
Provision for income taxes		79,878,043			74,953,611			4,924,432
		------------------			------------------			------------------
Results of producing activities	$	147,591,039		$	127,619,454		$	19,971,585
		===========			===========			===========
Amortization per physical unit of production
(equivalent Mcf of gas)	$	1.78		$	1.86		$	1.58
		===========			===========			===========

 

	Year Ended December 31, 2004
	Total			Domestic			New Zealand
Oil and gas sales	$	311,285,172		$	258,663,936		$	52,621,236
Lease operating cost		(41,214,256)			(30,191,889)			(11,022,367)
Severance and other taxes		(30,401,293)			(26,713,592)			(3,687,701)
Depreciation, depletion and amortization		(80,504,043)			(61,478,364)			(19,025,679)
Accretion of asset retirement obligation		(673,654)			(505,174)			(168,480)
		------------------			------------------			------------------
		158,491,926			139,774,917			18,717,009
Provision for income taxes		53,093,022			51,576,944			1,516,078
		------------------			------------------			------------------
Results of producing activities	$	105,398,904		$	88,197,973		$	17,200,931
		===========			===========			===========
Amortization per physical unit of production
(equivalent Mcf of gas)	$	1.38		$	1.46		$	1.17
		===========			===========			===========

 

These results of operations do not include the gains from our hedging activities of $4.0 million in 2006, and losses from our hedging activities of $1.1 million and $1.3 million for 2005 and 2004, respectively. Our lease operating costs per Mcfe produced were $0.89 in 2006, $0.79 in 2005, and $0.71 in 2004.

The accretion of asset retirement obligation has been included in the 2006, 2005 and 2004 periods.

We used our effective tax rate in each country to compute the provision for income taxes in each year presented.

Supplementary Reserves 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 has audited 100% of our proved reserves. Gruy’s audit was conducted according to standards approved by the Board of Directors of the Society of Petroleum Engineers, Inc. and included examination, on a test basis, of the evidence supporting our reserves. Gruy’s audit was based upon review of production histories and other geological, economic, and engineering data provided by us. Gruy’s report dated January 23, 2007, is set forth as an exhibit to the Form 10-K Report for the year ended December 31, 2006, 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, 2003	335,804,862		80,759,903		242,321,275		67,015,693		93,483,587		13,744,210
Revisions of previous estimates(1)	(3,306,705)		(1,117,715)		(1,619,531)		695,274		(1,687,174)		(1,812,989)
Purchases of minerals in place	9,808,953		5,602,508		9,808,953		5,602,508		--		--
Sales of minerals in place	(2,524,760)		(44,803)		(2,524,760)		(44,803)		--		--
Extensions, discoveries, and other additions	2,205,670		830,111		2,205,670		830,111		--		--
Production	(23,741,726)		(5,762,796)		(12,299,772)		(4,959,740)		(11,441,954)		(803,056)
	---------------------		---------------------		---------------------		---------------------		---------------------		---------------------
Proved reserves as of December 31, 2004	318,246,294		80,267,208		237,891,835		69,139,043		80,354,459		11,128,165
Revisions of previous estimates(1)	(21,461,605)		(2,199,673)		(13,751,124)		(1,023,808)		(7,710,481)		(1,175,866)
Purchases of minerals in place	9,336,088		3,262,761		9,336,088		3,262,761		--		--
Sales of minerals in place	(3,737,714)		(100,121)		(3,737,714)		(100,121)		--		--
Extensions, discoveries, and other additions	8,699,329		3,819,595		7,275,207		3,722,744		1,424,122		96,851
Production	(23,609,242)		(5,996,714)		(11,739,485)		(5,217,343)		(11,869,757)		(779,371)
	---------------------		---------------------		---------------------		---------------------		---------------------		---------------------
Proved reserves as of December 31, 2005	287,473,150		79,053,056		225,274,807		69,783,276		62,198,343		9,269,779
Revisions of previous estimates(1)	(33,631,025)		3,127,635		(34,542,219)		3,135,885		911,194		(8,250)
Purchases of minerals in place	60,187,095		2,922,553		60,187,095		2,922,553		--		--
Sales of minerals in place	(6,122,283)		(708,691)		(6,122,283)		(708,691)		--		--
Extensions, discoveries, and other additions	39,012,428		5,627,297		38,466,980		5,512,795		545,448		114,502
Production	(22,787,948)		(7,902,766)		(13,603,589)		(7,181,287)		(9,184,359)		(721,479)
	---------------------		---------------------		---------------------		---------------------		---------------------		---------------------
Proved reserves as of December 31, 2006	324,131,417		82,119,084		269,660,791		73,464,531		54,470,626		8,654,552
	=============		=============		=============		=============		=============		=============
Proved developed reserves: (2)
December 31, 2003	210,119,927		45,525,366		138,173,341		38,767,983		71,946,586		6,757,383
December 31, 2004	193,310,761		42,037,852		140,549,052		36,628,873		52,761,709		5,408,979
December 31, 2005	152,001,133		37,989,821		125,367,690		35,298,324		26,633,443		2,691,497
December 31, 2006	151,276,834		34,956,469		133,815,108		33,345,567		17,461,726		1,610,902

 

(1)Revisions 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, NGL, and natural gas prices at each year-end. Proved reserves, as of December 31, 2006, were based upon prices in effect at year-end. Our hedges at year-end 2006 consisted of natural gas price floors with strike prices higher than the period end price and thus would not materially affect prices used in these calculations. The weighted average of 2006 year-end prices for total, domestic, and New Zealand were $5.46, $5.84, and $3.59 per Mcf of natural gas, $60.41, $60.07, and $63.51 per barrel of oil, and $30.93, $31.54 and $26.84 per barrel of NGL, respectively. This compares to $8.94, $10.36, and $3.79 per Mcf of natural gas, $60.12, $60.00, and $60.98 per barrel of oil, and $31.40, $33.28 and $19.20 per barrel of NGL as of December 31, 2005, for total, domestic, and New Zealand, respectively. The weighted average of 2004 year-end prices for total, domestic, and New Zealand were $5.16, $5.87, and $3.07 per Mcf of natural gas, $41.07, $42.21, and $33.60 per barrel of oil, and $25.48, $26.49 and $20.48 per barrel of NGL, respectively.

(2)At December 31, 2006, 44% of our reserves were proved developed, compared to 50% at December 31, 2005, 56% at December 31, 2004, and 59% at December 31, 2003.

 

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, 2006
	Total			Domestic			New Zealand
Future gross revenues	$	6,341,394,321		$	5,659,084,913			682,309,408
Future production costs		(1,393,634,094)			(1,167,117,123)			(226,516,971)
Future development costs		(935,003,617)			(886,842,793)			(48,160,824)
		-------------------			----------------------			----------------------
Future net cash flows before income taxes		4,012,756,610			3,605,124,997			407,631,613
Future income taxes		(1,187,858,603)			(1,137,617,295)			(50,241,308)
		-------------------			----------------------			----------------------
Future net cash flows after income taxes		2,824,898,007			2,467,507,702			357,390,305
Discount at 10% per annum		(956,238,277)			(835,593,066)			(120,645,211)
		-------------------			----------------------			----------------------
Standardized measure of discounted future net cash flows
relating to proved oil and gas reserves	$	1,868,659,730		$	1,631,914,636		$	236,745,094
		=============			=============			=============

 

	Year Ended December 31, 2005
	Total			Domestic			New Zealand
Future gross revenues	$	6,917,103,123		$	6,194,560,214		$	722,542,909
Future production costs		(1,334,822,738)			(1,122,637,935)			(212,184,803)
Future development costs		(710,343,331)			(667,526,650)			(42,816,681)
		-------------------			----------------------			----------------------
Future net cash flows before income taxes		4,871,937,054			4,404,395,629			467,541,425
Future income taxes		(1,538,799,956)			(1,461,577,946)			(77,222,010)
		-------------------			----------------------			----------------------
Future net cash flows after income taxes		3,333,137,098			2,942,817,683			390,319,415
Discount at 10% per annum		(1,173,767,635)			(1,048,193,951)			(125,573,684)
		-------------------			----------------------			----------------------
Standardized measure of discounted future net cash flows
relating to proved oil and gas reserves	$	2,159,369,463		$	1,894,623,732		$	264,745,731
		=============			=============			=============

 

	Year Ended December 31, 2004
	Total			Domestic			New Zealand
Future gross revenues	$	4,711,060,300		$	4,122,705,861		$	588,354,439
Future production costs		(1,029,449,670)			(819,035,166)			(210,414,504)
Future development costs		(480,093,684)			(434,305,537)			(45,788,147)
		-------------------			----------------------			----------------------
Future net cash flows before income taxes		3,201,516,946			2,869,365,158			332,151,788
Future income taxes		(896,135,438)			(866,598,544)			(29,536,894)
		-------------------			----------------------			----------------------
Future net cash flows after income taxes		2,305,381,508			2,002,766,614			302,614,894
Discount at 10% per annum		(840,436,013)			(746,227,690)			(94,208,323)
		-------------------			----------------------			----------------------
Standardized measure of discounted future net cash flows
relating to proved oil and gas reserves	$	1,464,945,495		$	1,256,538,924		$	208,406,571
		=============			=============