Exhibit 12.1
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth our ratio of earnings to fixed charges:
|
| Year Ending December 31, |
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|
| 2008 |
| 2007 |
| 2006 |
| 2005 |
| 2004 |
| |||||
|
| (Dollars in thousands except ratio) |
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Earnings: |
|
|
|
|
|
|
|
|
|
|
| |||||
Income (loss) from continuing operations before income taxes and cumulative change in accounting principle |
| $ | (1,430,298 | ) | $ | 544,625 |
| $ | 544,324 |
| $ | 516,455 |
| $ | 246,318 |
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|
|
|
|
|
|
|
|
|
|
| |||||
Additions: |
|
|
|
|
|
|
|
|
|
|
| |||||
Fixed charges as shown below |
| 33,491 |
| 38,014 |
| 29,795 |
| 19,262 |
| 1,900 |
| |||||
Distributions received from equity-method investees |
| 39 |
| 3,015 |
| 59,823 |
| 302 |
| — |
| |||||
|
| 33,530 |
| 41,029 |
| 89,618 |
| 19,564 |
| 1,900 |
| |||||
Subtractions: |
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|
|
|
|
|
|
|
|
|
| |||||
Equity in income of investees |
| 39 |
| 4,194 |
| 17,712 |
| 473 |
| — |
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|
|
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|
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|
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|
|
|
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Interest capitalized |
| 22,108 |
| 19,680 |
| 25,478 |
| 12,315 |
| — |
| |||||
|
| 22,147 |
| 23,874 |
| 43,190 |
| 12,788 |
| — |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Earnings (losses) as adjusted |
| (1,418,915 | ) | $ | 561,780 |
| $ | 590,752 |
| $ | 523,231 |
| $ | 248,218 |
| |
Fixed charges: |
|
|
|
|
|
|
|
|
|
|
| |||||
Interest on indebtedness, expensed or capitalized |
| 32,064 |
| 37,966 |
| 31,829 |
| 20,236 |
| 1,075 |
| |||||
Amortization of premium on indebtedness, expensed or capitalized |
| (709 | ) | (1,908 | ) | (3,784 | ) | (2,132 | ) | — |
| |||||
Interest within rent expense |
| 2,136 |
| 1,956 |
| 1,750 |
| 1,158 |
| 825 |
| |||||
Total fixed charges |
| 33,491 |
| $ | 38,014 |
| $ | 29,795 |
| $ | 19,262 |
| $ | 1,900 |
| |
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Ratio of earnings to fixed charges |
| — | (a) | 14.8 |
| 19.8 |
| 27.2 |
| 130.6 |
| |||||
(a) In 2008, earnings were insufficient to cover fixed charges by $1.452 billion and therefore no ratio is shown. The insufficiency was primarily a result of non-cash impairments of oil and gas properties totaling $2.2 billion that were recorded due to declines in commodity prices during the last half of 2008.
The ratio of earnings to fixed charges was computed by dividing earnings by fixed charges. Earnings consist of income from continuing operations before income taxes and cumulative change in accounting principle plus distributions received from equity investments, and fixed charges, minus income from equity investments and capitalized interest. Fixed charges consist of interest expensed, which includes amortization of the premium of fair market value over the face value of debt, an estimated interest component in net rental expense, and interest capitalized.
In May, 2008, the Financial Accounting Standards Board (“FASB”) issued a new Staff Position (No. APB 14-1), Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement), that became effective for fiscal years beginning after December 15, 2008 which impacts the accounting for the components of convertible debt that can be settled wholly or partly in cash upon conversion. The new requirements are to be applied retrospectively to previously issued convertible debt instruments. We adopted the provisions of this new Staff Position on January 1, 2009. The following table sets forth our restated ratio of earnings to fixed charges after
giving effect to this new Staff Position:
|
| Year Ending December 31, |
| |||||||||||||
|
| 2008 |
| 2007 |
| 2006 |
| 2005 |
| 2004 |
| |||||
|
| (Dollars in thousands except ratio) |
| |||||||||||||
Earnings: |
|
|
|
|
|
|
|
|
|
|
| |||||
Income (loss) from continuing operations before income taxes and cumulative change in accounting principle |
| (1,451,649 | ) | $ | 542,724 |
| $ | 542,374 |
| $ | 515,317 |
| $ | 246,318 |
| |
|
|
|
|
|
|
|
|
|
|
|
| |||||
Additions: |
|
|
|
|
|
|
|
|
|
|
| |||||
Fixed charges as shown below |
| 35,214 |
| 39,915 |
| 31,745 |
| 20,399 |
| 1,900 |
| |||||
Distributions received from equity-method investees |
| 39 |
| 3,015 |
| 59,823 |
| 302 |
| — |
| |||||
|
| 35,253 |
| 42,930 |
| 91,568 |
| 20,701 |
| 1,900 |
| |||||
Subtractions: |
|
|
|
|
|
|
|
|
|
|
| |||||
Equity in income of investees |
| 39 |
| 4,194 |
| 17,712 |
| 473 |
| — |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Interest capitalized |
| 22,108 |
| 19,680 |
| 25,478 |
| 12,315 |
| — |
| |||||
|
| 22,147 |
| 23,874 |
| 43,190 |
| 12,788 |
| — |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Earnings (losses) as adjusted |
| (1,438,543 | ) | $ | 561,780 |
| $ | 590,752 |
| $ | 523,230 |
| $ | 248,218 |
| |
Fixed charges: |
|
|
|
|
|
|
|
|
|
|
| |||||
Interest on indebtedness, expensed or capitalized |
| 32,064 |
| 37,966 |
| 31,829 |
| 20,236 |
| 1,075 |
| |||||
Amortization of discount on indebtedness, expensed or capitalized |
| 1,014 |
| 1,139 |
| 1,190 |
| 710 |
| — |
| |||||
Amortization of premium on indebtedness, expensed or capitalized |
| — |
| (1,146 | ) | (3,024 | ) | (1,705 | ) | — |
| |||||
Interest within rent expense |
| 2,136 |
| 1,956 |
| 1,750 |
| 1,158 |
| 825 |
| |||||
Total fixed charges |
| $ | 35,214 |
| $ | 39,915 |
| $ | 31,745 |
| $ | 20,399 |
| $ | 1,900 |
|
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| |||||
Ratio of earnings to fixed charges |
| — | (b) | 14.1 |
| 18.6 |
| 25.6 |
| 130.6 |
| |||||
(b) In 2008, earnings were insufficient to cover fixed charges by $1.474 billion and therefore no ratio is shown. The insufficiency was primarily a result of non-cash impairments of oil and gas properties totaling $2.2 billion that were recorded due to declines in commodity prices during the last half of 2008.
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