Occidental Petroleum 2006 Annual Report Download - page 94
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For purposes of the following disclosures, estimates were made of quantities of proved reserves and the periods during which they are
expected to be produced. Future cash flows were computed by applying year-end prices to Occidental’s share of estimated annual future
production from proved oil and gas reserves, net of royalties. Future development and production costs were computed by applying year-end costs
to be incurred in producing and further developing the proved reserves. Future income tax expenses were computed by applying, generally,
year-end statutory tax rates (adjusted for permanent differences, tax credits, allowances and foreign income repatriation considerations) to the
estimated net future pre-tax cash flows. The discount was computed by application of a 10-percent discount factor. The calculations assumed the
continuation of existing economic, operating and contractual conditions at each of December 31, 2006, 2005 and 2004. However, such arbitrary
assumptions have not necessarily proven to be the case in the past. Other assumptions of equal validity would give rise to substantially different
results.
The year-end prices used to calculate future cash flows vary by producing area and market conditions. For the 2006, 2005 and 2004
disclosures, the West Texas Intermediate oil prices used were $61.05 per barrel, $61.04 per barrel and $43.45 per barrel, respectively. The Henry
Hub gas prices used for the 2006, 2005 and 2004 disclosures were $5.64/MMBtu, $10.08/MMBtu and $6.03/MMBtu, respectively.
Standardized Measure of Discounted Future Net Cash Flows
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