Occidental Petroleum 2014 Annual Report Download - page 138

Occidental Petroleum Corporation
January 30, 2015
Page 6
As indicated above, the product prices that were used by Occidental to determine the future gross revenue for each
property reviewed by us reflect adjustments to the benchmark prices for gravity, quality, local conditions, gathering and
transportation fees and distance from market, referred to herein as “differentials.” The differentials used by Occidental were
accepted as factual data. We have not conducted an independent verification of the data used by Occidental.
While it may reasonably be anticipated that the future prices received for the sale of production and the operating costs and
other costs relating to such production may also increase or decrease from existing levels, such changes were, in accordance with
rules adopted by the SEC, omitted from consideration by Occidental in this process and omitted by us in conducting this review.
Accumulated gas production imbalances, if any, were not taken into account in the proved reserve estimates of gas
reviewed. The proved gas volumes included herein attribute gas consumed in operations as reserves for those fields where the
inclusion of such volumes was appropriate.
Operating costs used by Occidental are based on the operating expense reports of Occidental and include only those costs
directly applicable to the leases or wells for the properties reviewed by us. The operating costs include a portion of general and
administrative costs allocated directly to the leases and wells. For operated properties, the operating costs include an appropriate
level of corporate general administrative and overhead costs. The operating costs for non-operated properties include the Council
of Petroleum Accounting Societies overhead costs that are allocated directly to the leases and wells under terms of operating
agreements. The operating costs used by Occidental were accepted as factual data and reviewed by us for their reasonableness;
however, we have not conducted an independent verification of the data used by Occidental.
Development costs used by Occidental are based on authorizations for expenditure (AFE) for the proposed work or actual
costs for similar projects. The development costs used by Occidental were accepted as factual data and reviewed by us for their
reasonableness; however, we have not conducted an independent verification of the data used by Occidental.
The proved developed non-producing and undeveloped reserves for the properties reviewed by us were incorporated by
Occidental in accordance with Occidental’s plans to develop these reserves as of December 31, 2014. The implementation of
Occidental’s development plans as presented to us is subject to the approval process adopted by Occidental’s management. As a
result of our inquiries during the course of our review, Occidental has informed us that the development activities for the properties
reviewed by us have been subjected to and received the internal approvals required by Occidental’s management at the
appropriate local, regional and corporate level. In addition to the internal approvals as noted, certain development activities may still
be subject to partner AFE processes, Joint Operating Agreement requirements or other administrative approvals external to
Occidental. Additionally, Occidental has informed us that they are not aware of any legal, regulatory or political obstacles that would
significantly alter their plans. While these plans could change from those under existing economic conditions as of December 31,
2014, such changes were, in accordance with rules adopted by the SEC, omitted from consideration in making this evaluation.
Future Production Rate Assumptions Employed by Occidental for Estimating Reserves
Occidental’s forecasts of future production rates are based on historical performance from wells currently on production. If
no production decline trend has been established, future production rates were held constant, or adjusted for the effects of
curtailment where appropriate, until a decline in ability to produce was anticipated. An estimated rate of decline was then applied to
depletion of the reserves.
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