Requirement for Disclosures

1
Requirement for Disclosures

• Recall discussion from Chapter 2 on Full cost
  versus successful efforts and the SECs proposed
  Revenue Recognition Accounting

2
Oil Gas Disclosures

• SFAS 69 applies to publicly-traded corporations
  with significant OG producing activities (if any
  of the following are met)
• Revenues from oil gas producing activities gt
  10 of combined revenues of all industry segments
• Results of operations for OG gt 10 of the
  greater of
• Combined profit of all segments that recognized a
  profit, or
• Combined losses of all segments that recognized
  losses
• Assets related to OG producing activities gt 10
  of the entitys assets excluding assets used
  exclusively for general corporate purposes

3
Required Disclosures

• Historical
• 1. Proved reserve quantity information
• 2. Capitalized costs relating to oil gas
  producing activities
• 3. Costs incurred for property acquisition,
  exploration, and development activities
• 4. Results of operations for oil gas producing
  activities

4
Required Disclosures

• Future
• 5. A standardized measure of discounted future
  net cash flows relating to proved oil and gas
  reserve quantities
• 6. Changes in standardized measure of discounted
  future net cash flows relating to proved oil
  gas reserve quantities

5
Disclosures Additional Comments

• Disclosures presented in the aggregate
• 1, 3, 4, 5 must be presented for each
  geographical area
• 1 3 are the same for FC and SE
• 2 4 differ for FC SE

6
Disclosure 1 - Proved Reserve Quantity
Information

• Use deterministic approach for computing reserves
  in financial statements and footnotes
• Comparative financial statements show current
  year and prior year
• Show oil and gas separately
• Show PR and PDR separately
• Start with BOY reserves and walk forward to EOY
• Revision of prior year estimates
• Add new discoveries
• Subtract current year production

7
Disclosure 2 Capitalized Costs Relating to Oil
Gas Producing Activities

• For 2 years, but this is not a walk-forward
  schedule
• Capitalized cost of unproved properties
• Acquisition costs (lease bonus, legal, etc.)
• Wells in progress (IDC and LWE)
• Capitalized cost of proved properties
• Acquisition costs
• Wells Related EF
• Less DDA

8
Disclosure 3 Costs Incurred in Property
Acquisition, Exploration, Development Activities

• For 2 years, but this is not a walk-forward
  schedule
• Acquisition costs of proved properties
• Acquisition costs of unproved properties
• Exploration
• GG costs
• Delay rentals
• Exploratory drilling
• Development

9
Disclosure 4 Results of Operations from Oil
Gas Producing Activities

• 2 year statement
• Revenues
• - Productions costs (LOE)
• - Exploration expenses (GG, DHC, DR)
• - DDA
• Pre-tax income from producing activities
• We will omit income tax calculation

10
Disclosure 5 Standardized Measure of
Discounted Future Net Cash Flows Related to
Proved OG Reserves (SMOG)

• This disclosure places a value on future cash
  inflows less future cash outflows, discounted _at_
  10
• We will do this disclosure before income tax

11
Disclosure 6 Changes in Standardized Measure
of Discounted Future Net Cash Flows Related to
Proved Reserves

• This disclosure walks forward the standardized
  measure of future cash flows showing how the
  change in future cash flows came about.