Supplemental Oil and Gas Information (Unaudited) | N ote 16. Supplemental Oil and Gas Information (Unaudited) Capitalized Costs Relating to Oil and Natural Gas Producing Activities The total amount of capitalized costs relating to oil and natural gas producing activities and the total amount of related accumulated depreciation, depletion and amortization is as follows at the dates indicated. Years Ended December 31, 2015 2014 2013 (In thousands) Evaluated oil and natural gas properties $ 3,616,325 $ 3,329,338 $ 2,077,344 Support equipment and facilities 205,876 198,088 16,030 Unevaluated oil and natural gas properties — — 1,960 Accumulated depletion, depreciation, and amortization (1,878,549 ) (1,060,114 ) (464,812 ) Total $ 1,943,652 $ 2,467,312 $ 1,630,522 Costs Incurred in Oil and Natural Gas Property Acquisition, Exploration and Development Activities Costs incurred in property acquisition, exploration and development activities were as follows for the periods indicated: Years Ended December 31, 2015 2014 2013 (In thousands) Property acquisition costs, proved $ 77,834 $ 983,076 $ 37,786 Property acquisition costs, unproved 1,887 720 — Exploration 2,078 — — Development 233,241 308,724 166,090 Total $ 315,040 $ 1,292,520 $ 203,876 Standardized Measure of Discounted Future Net Cash Flows from Proved Reserves As required by the FASB and SEC, the standardized measure of discounted future net cash flows presented below is computed by applying first-day-of-the-month average prices, year-end costs and legislated tax rates and a discount factor of 10 percent to proved reserves. We do not believe the standardized measure provides a reliable estimate of the Partnership’s expected future cash flows to be obtained from the development and production of its oil and gas properties or of the value of its proved oil and gas reserves. The standardized measure is prepared on the basis of certain prescribed assumptions including first-day-of-the-month average prices, which represent discrete points in time and therefore may cause significant variability in cash flows from year to year as prices change. Oil and Natural Gas Reserves Users of this information should be aware that the process of estimating quantities of “proved” and “proved developed” oil and natural gas reserves is very complex, requiring significant subjective decisions in the evaluation of all available geological, engineering and economic data for each reservoir. The data for a given reservoir may also change substantially over time as a result of numerous factors including, but not limited to, additional development activity, evolving production history and continual reassessment of the viability of production under varying economic conditions. As a result, revisions to existing reserve estimates may occur from time to time. Although every reasonable effort is made to ensure reserve estimates reported represent the most accurate assessments possible, the subjective decisions and variances in available data for various reservoirs make these estimates generally less precise than other estimates included in the financial statement disclosures. Proved reserves are those quantities of oil and natural gas that by analysis of geoscience and engineering data can be estimated with reasonable certainty to be economically producible — from a given date forward, from known reservoirs, and under existing economic conditions, operating methods and government regulations — prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the estimation. The project to extract the hydrocarbons must have commenced or the operator must be reasonably certain that it will commence the project within a reasonable time. We engaged Ryder Scott to audit our reserves estimates for all of our estimated proved reserves (by volume) at December 31, 2015. All proved reserves are located in the United States and all prices are held constant in accordance with SEC rules. The weighted-average benchmark product prices used for valuing the reserves are based upon the average of the first-day-of-the-month price for each month within the period January through December of each year presented: 2015 2014 2013 Oil ($/Bbl): WTI (1) $ 46.79 $ 91.48 $ 93.42 NGL ($/Bbl): WTI (1) $ 46.79 $ 91.48 $ 93.42 Natural Gas ($/MMbtu): Henry Hub (2) $ 2.58 $ 4.35 $ 3.67 (1) The weighted average WTI price was adjusted by lease for quality, transportation fees, and a regional price differential. (2) The weighted average Henry Hub price was adjusted by lease for energy content, compression charges, transportation fees, and regional price differentials. The following tables set forth estimates of the net reserves as of December 31, 2015, 2014 and 2013, respectively: Year Ended December 31, 2015 Oil Gas NGLs Equivalent (MBbls) (MMcf) (MBbls) (MMcfe) Proved developed and undeveloped reserves: Beginning of year 100,258 727,216 59,034 1,682,960 Extensions and discoveries 2,319 8,686 558 25,950 Purchase of minerals in place 10,132 34,128 367 97,122 Production (4,087 ) (50,875 ) (2,820 ) (92,315 ) Sale of minerals in place (380 ) (13,731 ) (758 ) (20,559 ) Revision of previous estimates (17,297 ) (243,898 ) (12,986 ) (425,587 ) End of year 90,945 461,526 43,395 1,267,571 Proved developed reserves: Beginning of year 54,723 417,247 37,260 969,141 End of year 50,817 311,147 30,315 797,936 Proved undeveloped reserves: Beginning of year 45,535 309,969 21,774 713,819 End of year 40,128 150,379 13,080 469,635 Year Ended December 31, 2014 Oil Gas NGLs Equivalent (MBbls) (MMcf) (MBbls) (MMcfe) Proved developed and undeveloped reserves: Beginning of year 39,635 737,908 35,794 1,190,484 Extensions and discoveries 849 12,783 711 22,145 Purchase of minerals in place 69,095 13,036 22,351 561,713 Production (3,135 ) (48,721 ) (2,498 ) (82,520 ) Revision of previous estimates (6,186 ) 12,210 2,676 (8,862 ) End of year 100,258 727,216 59,034 1,682,960 Proved developed reserves: Beginning of year 22,429 427,983 17,637 668,381 End of year 54,723 417,247 37,260 969,141 Proved undeveloped reserves: Beginning of year 17,206 309,925 18,157 522,103 End of year 45,535 309,969 21,774 713,819 Year Ended December 31, 2013 Oil Gas NGLs Equivalent (MBbls) (MMcf) (MBbls) (MMcfe) Proved developed and undeveloped reserves: Beginning of year 40,822 794,369 39,554 1,276,625 Extensions and discoveries 5,814 85,455 4,353 146,463 Purchase of minerals in place 119 16,294 258 18,554 Production (1,797 ) (41,287 ) (1,806 ) (62,907 ) Revision of previous estimates (5,323 ) (116,923 ) (6,565 ) (188,251 ) End of year 39,635 737,908 35,794 1,190,484 Proved developed reserves: Beginning of year 24,784 441,858 18,060 698,922 End of year 22,429 427,983 17,637 668,381 Proved undeveloped reserves: Beginning of year 16,038 352,511 21,494 577,703 End of year 17,206 309,925 18,157 522,103 Noteworthy amounts included in the categories of proved reserve changes in the above tables include: · We acquired 561.7 Bcfe in multiple acquisitions during the year ended December 31, 2014, the largest being the Wyoming Acquisition of 497.2 Bcfe. We also acquired 45.0 Bcfe from the Eagle Ford Acquisition. An upward revision of natural gas for the year ended December 31, 2014 was due to increased natural gas prices on certain East Texas properties. The upward revision was partially offset by a downward revision of natural gas for the year ended December 31, 2014, which was primarily due to updated well performance data in certain other East Texas fields. Proved undeveloped reserves increased during the year ended December 31, 2014 primarily due to the Wyoming Acquisition. · The 415.4 Bcfe reduction in reserves for the year ended December 31, 2015 is primarily due to a 413 Bcfe downward pricing revision and a 13 Bcfe downward revision due to updated well performance data. We acquired 97.1 Bcfe during the year ended December 31, 2015, the largest being the 2015 Beta Acquisition of 58.5 Bcfe. Proved undeveloped reserves decreased primarily due to downward pricing during the year ended December 31, 2015. See Note 3 for additional information on acquisitions and divestitures. A variety of methodologies are used to determine our proved reserve estimates. The principal methodologies employed are reservoir simulation, decline curve analysis, volumetric, material balance, advance production type curve matching, petro-physics/log analysis and analogy. Some combination of these methods is used to determine reserve estimates in substantially all of our fields. The standardized measure of discounted future net cash flows is as follows: Years Ended December 31, 2015 2014 2013 (In thousands) Future cash inflows $ 5,952,935 $ 14,190,450 $ 7,672,312 Future production costs (3,194,577 ) (4,821,051 ) (2,963,146 ) Future development costs (808,512 ) (1,455,926 ) (901,374 ) Future income tax expense (1) — (119,675 ) — Future net cash flows for estimated timing of cash flows 1,949,846 7,793,798 3,807,792 10% annual discount for estimated timing of cash flows (1,360,292 ) (4,881,811 ) (2,089,588 ) Standardized measure of discounted future net cash flows $ 589,554 $ 2,911,987 $ 1,718,204 (1) We are subject to the Texas margin tax based on the taxable margin apportioned to Texas. However, due to immateriality we have excluded the impact of this tax for the years ended December 31, 2015, 2014 and 2013. The 2014 amount was related to Classic since its reserves were a part of a taxable entity for federal income tax purposes for the year ended December 31, 2014. Changes in Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Reserves The following is a summary of the changes in the standardized measure of discounted future net cash flows for the proved oil and natural gas reserves during each of the years in the three year period ended December 31, 2015: Years Ended December 31, 2015 2014 2013 (In thousands) Beginning of year $ 2,911,987 $ 1,718,204 $ 1,772,240 Sale of oil and natural gas produced, net of production costs (128,382 ) (354,932 ) (255,031 ) Purchase of minerals in place 75,998 1,489,477 23,160 Sale of minerals in place (45,100 ) — — Extensions and discoveries 18,582 44,843 150,631 Changes in income taxes, net 63,180 (63,180 ) — Changes in prices and costs (2,764,481 ) (170,682 ) (26,648 ) Previously estimated development costs incurred 322,446 275,078 199,775 Net changes in future development costs 448,089 (133,098 ) (16,219 ) Revisions of previous quantities (344,775 ) (48,087 ) (373,109 ) Accretion of discount 297,517 171,820 177,223 Change in production rates and other (265,507 ) (17,456 ) 66,182 End of year $ 589,554 $ 2,911,987 $ 1,718,204 |