Occidental Petroleum 2008 Annual Report Download - page 92

STANDARDIZED MEASURE, INCLUDING YEAR-TO-YEAR CHANGES THEREIN, OF DISCOUNTED FUTURE NET CASH
FLOWS
For purposes of the following disclosures, future cash flows were computed by applying year-end prices to Occidental's proved oil and
gas reserves, except in those instances in which sales are covered by physical contract terms, in which case contract price and terms for the
periods during which reserves are expected to be produced were taken into account. Derivative instruments that qualify as cash flow hedges
have not been included in the estimates of future net cash flows. Future development and production costs were computed by applying
current costs. 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, 2008, 2007 and 2006. Such arbitrary assumptions have not necessarily proven
accurate in the past. Other assumptions of equal validity would give rise to substantially different results.
The year-end realized prices used to calculate future cash flows vary by producing area and market conditions. For the 2008, 2007 and
2006 disclosures, the West Texas Intermediate oil prices used were $44.60 per barrel, $95.98 per barrel and $61.05 per barrel, respectively.
The Henry Hub gas prices used for the 2008, 2007 and 2006 disclosures were $5.71 per MMBtu, $6.795 per MMBtu and $5.64 per MMBtu,
respectively.
Standardized Measure of Discounted Future Net Cash Flows
In millions
Consolidated Subsidiaries
United
States
Latin
America
Middle East/
North Africa Total
Other
Interests (a)
AT DECEMBER 31, 2008
Future cash flows $75,267 $9,880 $16,880 $102,027 $(40)
Future costs
Production costs and other operating
expenses (38,315) (4,449) (6,905) (49,669) 82
Development costs (b) (7,376) (1,713) (2,405) (11,494) (26)
Future income tax expense (6,867) (853) — (7,720) 34
Future net cash flows 22,709 2,865 7,570 33,144 50
Ten percent discount factor (12,344) (1,033) (3,112) (16,489) (9)
Standardized measure $10,365 $1,832 $4,458 $16,655 $41
AT DECEMBER 31, 2007
Future cash flows $166,082 $11,433 $25,195 $202,710 $(187)
Future costs
Production costs and other operating
expenses (57,618) (3,432) (4,949) (65,999) 74
Development costs (b) (5,797) (1,407) (1,927) (9,131) (24)
Future income tax expense (34,375) (2,171) (1,164) (37,710) 112
Future net cash flows 68,292 4,423 17,155 89,870 (25)
Ten percent discount factor (39,476) (1,387) (6,145) (47,008) 5
Standardized measure $28,816 $3,036 $11,010 $42,862 $(20)
AT DECEMBER 31, 2006
Future cash flows $99,453 $9,279 $18,436 $127,168 $1,139
Future costs
Production costs and other operating
expenses (46,994) (3,002) (4,676) (54,672) (980)
Development costs (b) (4,145) (1,213) (1,359) (6,717) (85)
Future income tax expense (15,766) (1,778) (325) (17,869) 44
Future net cash flows 32,548 3,286 12,076 47,910 118
Ten percent discount factor (17,571) (1,178) (4,441) (23,190) (17)
Standardized measure $14,977 $2,108 $7,635 $24,720 $101
(a) The 2008 and 2007 amounts reflect the minority interest in a Colombian subsidiary, partially offset by Occidental's share of the future net cash flows from an equity
investee in Yemen. The 2006 amounts include Occidental’s share of the future net cash flows from an equity investee in Yemen and a Russian joint venture,
partially offset by the minority interest in a Colombian subsidiary. Occidental's joint venture interest in Russia was sold in 2007.
(b) Includes dismantlement and abandonment costs.
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Changes in the Standardized Measure of Discounted Future