Freeport-McMoRan 2013 Annual Report Download - page 133

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2013 ANNUAL REPORT | 131
FCX expects that 61 percent of the costs not subject to amortization
at December 31, 2013, will be transferred to the amortization
base over the next five years and the majority of the remainder in
the next seven to ten years.
Approximately 41 percent of the total U.S. net undeveloped
acres is covered by leases that expire from 2014 to 2016; however,
a significant portion of this acreage is expected to be retained
by drilling operations or other means. The lease for FM O&G’s
Morocco acreage expires in 2016; however, FM O&G has the
ability to extend the lease through 2019. Over 90 percent of the
acreage in the Haynesville shale play in Louisiana and over
70 percent of the acreage in the Eagle Ford shale play in Texas is
currently held by production or held by operations, and future
plans include drilling or otherwise extending leases on the
remaining acreage.
Results of Operations for Oil and Gas Producing Activities. The
results of operations from oil and gas producing activities from
June 1, 2013, to December 31, 2013, presented below exclude
non-oil and gas revenues, general and administrative expenses,
interest expense and interest income. Income tax expense
was determined by applying the statutory rates to pre-tax
operating results:
Revenues from oil and gas producing activities $ 2,616
Production and delivery costs (682)
Depreciation, depletion and amortization (1,358)
Income tax expense (based on FCX’s statutory tax rate) (219)
Results of operations from oil and gas producing
activities (excluding general and administrative
expenses, interest expense and interest income) $ 357
Proved Oil and Natural Gas Reserve Information. The following
information summarizes the net proved reserves of oil (including
condensate and natural gas liquids (NGLs)) and natural gas and
the standardized measure as described below. All of the oil and
natural gas reserves are located in the U.S.
Management believes the reserve estimates presented herein,
in accordance with generally accepted engineering and evaluation
principles consistently applied, are reasonable. However, there
are numerous uncertainties inherent in estimating quantities and
values of proved reserves and in projecting future rates of
production and the amount and timing of development
expenditures, including many factors beyond FCX’s control.
Reserve engineering is a subjective process of estimating the
recovery from underground accumulations of oil and natural gas
that cannot be measured in an exact manner, and the accuracy of
any reserve estimate is a function of the quality of available data
and of engineering and geological interpretation and judgment.
Because all oil and natural gas reserve estimates are to some
degree subjective, the quantities of oil and natural gas that are
NOTE 21. SUPPLEMENTARY OIL AND GAS INFORMATION
(UNAUDITED)
Costs Incurred. FCX’s oil and gas acquisition, exploration
and development activities since the acquisitions of PXP and
MMR follow:
Property acquisition costs:
Proved properties
a
$ 12, 20 5
Unproved properties
b
11,259
Exploration costs 502
Development costs 854
$ 24 ,8 20
a. Included $12.2 billion from the acquisitions of PXP and MMR.
b. Included $11.1 billion from the acquisitions of PXP and MMR.
These amounts included AROs of $1.1 billion (including $1.0 billion
assumed in the acquisitions of PXP and MMR), capitalized general
and administrative expenses of $67 million and capitalized
interest of $69 million.
Capitalized Costs. The following table presents the aggregate
capitalized costs subject to amortization for oil and gas properties
and the aggregate related accumulated amortization as of
December 31, 2013:
Properties subject to amortization $ 13, 82 9
Accumulated amortization (1,357)
$ 12,472
The average amortization rate per barrel of oil equivalents (BOE)
was $35.54 for the period from June 1, 2013, to December 31, 2013.
Costs Not Subject to Amortization. The following table summarizes
the categories of costs comprising the amount of unproved
properties not subject to amortization as of December 31, 2013:
U.S.:
Onshore
Acquisition costs $ 3,109
Exploration costs 8
Capitalized interest 11
Offshore
Acquisition costs 7,528
Exploration costs 163
Capitalized interest 53
International:
Offshore
Acquisition costs 15
Exploration costs —
Capitalized interest —
$ 10,887