Freeport-McMoRan 2014 Annual Report Download - page 140

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
138
The market price for GOM crude oil differs from WTI as a result
of a large portion of FCX’s production being sold under a Heavy
Louisiana Sweet based pricing. Approximately 35 percent of
FCX’s December 31, 2014, oil and natural gas reserve volumes are
attributable to properties in the GOM where oil price realizations
are generally higher because of these marketing contracts.
Estimated Quantities of Oil and Natural Gas Reserves. The
following table sets forth certain data pertaining to proved, proved
developed and proved undeveloped reserves, all of which
are in the U.S., for the years ended December 31, 2014 and 2013.
Oil Gas Total
(MMBbls)
a,b
(Bcf)
a
(MMBOE)
a
2014
Proved reserves:
Balance at beginning of year 370 562 464
Extensions and discoveries 10 35 16
Acquisitions of reserves in-place 14 9 16
Revisions of previous estimates (10) 140 13
Sale of reserves in-place (53) (54) (62)
Production (43) (82) (57)
Balance at end of year 288 610 390
Proved developed reserves at
December 31, 2014 184 369 246
Proved undeveloped reserves at
December 31, 2014 104 241 144
2013
Proved reserves:
Balance at beginning of year — — —
Acquisitions of PXP and MMR 368 626 472
Extensions and discoveries 20 20 24
Revisions of previous estimates 11 (26) 7
Sale of reserves in-place — (3) (1)
Production (29) (55) (38)
Balance at end of year 370 562 464
Proved developed reserves at
December 31, 2013 236 423 307
Proved undeveloped reserves at
December 31, 2013 134 139 157
a. MMBbls = million barrels; Bcf = billion cubic feet; MMBOE = million BOE
b. Includes 10 MMBbls of NGL proved reserves (7 MMBbls of developed and 3 MMBbls of
undeveloped) at December 31, 2014, and 20 MMBbls of NGL proved reserves (14 MMBbls
of developed and 6 MMBbls of undeveloped) at December 31, 2013.
For the year ended December 31, 2014, FCX had a total of
16 MMBOE of extensions and discoveries, including 8 MMBOE in
the Deepwater GOM, primarily associated with the continued
successful development at Horn Mountain and 5 MMBOE in the
Haynesville shale play resulting from continued successful drilling
that extended and developed FCX’s proved acreage. From
June 1, 2013, to December 31, 2013, FCX had a total of 24 MMBOE
of extensions and discoveries, including 16 MMBOE in the
Eagle Ford shale play resulting from continued successful drilling
that extended and developed FCX’s proved acreage and 5 MMBOE
in the Deepwater GOM, primarily associated with the previously
drilled Holstein Deep development acquired during 2013.
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 ultimately recovered, production and operating costs, the
amount and timing of future development expenditures and
future crude oil and natural gas sales prices may all differ from
those assumed in these estimates. In addition, different reserve
engineers may make different estimates of reserve quantities and
cash flows based upon the same available data. Therefore, the
standardized measure of discounted future net cash flows
(Standardized Measure) shown below represents estimates only
and should not be construed as the current market value of the
estimated reserves attributable to FCX’s oil and gas properties. In
this regard, the information set forth in the following tables
includes revisions of reserve estimates attributable to proved
properties acquired from PXP and MMR, and reflect additional
information from subsequent development activities, production
history of the properties involved and any adjustments in the
projected economic life of such properties resulting from changes
in product prices.
Decreases in the prices of crude oil and natural gas could have
an adverse effect on the carrying value of the proved reserves,
reserve volumes and FCX’s revenues, profitability and cash flows.
FCX’s reference prices for reserve determination are the WTI spot
price for crude oil and the Henry Hub spot price for natural gas.
As of February 20, 2015, the twelve-month average of the first-day-
of-the-month historical reference price for natural gas has
decreased from $4.35 per MMBtu at December 31, 2014, to $4.04
per MMBtu, while the comparable price for crude oil has
decreased from $94.99 per barrel at December 31, 2014, to $87.12
per barrel.
Historically, the market price for California crude oil differs from
the established market indices in the U.S. primarily because of
the higher transportation and refining costs associated with heavy
oil. In recent years, California market prices had strengthened
substantially against these indices, primarily due to increasing
world demand and declining domestic supplies of both Alaska
and California crude oil. This trend has reversed of late, however,
because of increasing production from U.S. shale plays and
other non-OPEC countries, low refinery utilization and high West
Coast inventory levels. Approximately 39 percent of FCX’s oil
and natural gas reserve volumes are attributable to properties in
California where differentials to the reference prices have been
volatile as a result of these factors.