Reserve and Related Financial Data (SMOG)-Unaudited | 15. Reserve and Related Financial Data (SMOG)—Unaudited Oil and Natural Gas Reserves Proved reserves represent quantities of oil, natural gas and NGLs which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be recoverable in the future from known reservoirs under existing economic conditions, operating methods and government regulations. Proved developed reserves are proved reserves which can be expected to be recovered through existing wells with existing equipment, infrastructure and operating methods. Proved reserves were estimated in accordance with guidelines established by the SEC, which require that reserve estimates be prepared under existing economic and operating conditions based upon the 12-month first-day-of-the-month The reserves at December 31, 2018 presented below were audited by CG&A and the reserves at December 31, 2017 presented below were prepared by CG&A. Estimates of proved reserves are inherently imprecise and are continually subject to revision based on production history, results of additional exploration and development, price changes and other factors. The reserves are located in various fields in Texas, New Mexico, Oklahoma, Colorado, Wyoming, North Dakota, Montana and Pennsylvania. All of the proved reserves are located in the continental United States. Crude Oil Natural Gas NGL Total Proved reserve quantities, December 31, 2016 7,174 22,991 2,356 13,363 Sales of minerals-in-place (1,291 ) (815 ) (200 ) (1,627 ) Extentions and discoveries 1,548 6,012 709 3,259 Acquisitions 2,141 9,380 1,116 4,820 Revisions of previous estimates (394 ) 2,601 108 147 Production (454 ) (1,768 ) (109 ) (858 ) Proved reserve quantities, December 31, 2017 8,724 38,401 3,980 19,104 Sales of minerals-in-place — — — — Extentions and discoveries 1,765 5,285 562 3,208 Acquisitions 3,669 13,862 1,374 7,354 Revisions of previous estimates (390 ) (3,245 ) (577 ) (1,508 ) Production (777 ) (2,507 ) (222 ) (1,417 ) Proved reserve quantities, December 31, 2018 12,991 51,796 5,117 26,741 Proved developed reserve quantities: December 31, 2017 2,804 13,028 1,185 6,160 December 31, 2018 6,067 21,735 1,898 11,588 Proved undeveloped reserve quantities: December 31, 2017 5,920 25,373 2,795 12,944 December 31, 2018 6,924 30,061 3,219 15,153 Changes in proved reserves that occurred during 2018 were primarily due to: • the acquisition of additional mineral and royalty interests located in the Permian, DJ, Anadarko and Williston Basins in multiple transactions, which included 7,354 MBoe of additional proved reserves; • well additions, extensions and discoveries of approximately 3,208 MBoe, as 555 horizontal well locations were converted from probable, possible and contingent resources to proved, due to continuous activity and delineation of additional zones on our mineral and royalty interests; and • net negative volume revisions of approximately 1,508 MBoe. These revisions were comprised of 536 MBoe of positive revisions attributable to pricing and were offset by negative revisions of 1,100 MBoe attributable to operator development timing as well as 944 MBoe of revisions associated with unit configuration and EUR adjustments to existing proved locations. Changes in proved reserves that occurred during 2017 were primarily due to: • the acquisition of additional mineral and royalty interests located in the Permian, DJ, Anadarko and Williston Basins in multiple transactions, which included 4,820 MBoe of additional proved reserves; • well additions, extensions and discoveries of approximately 3,259 MBoe, as 854 horizontal well locations were converted from probable, possible and contingent resources to proved, due to continuous activity and delineation of additional zones on our mineral and royalty interests; • the divestiture of 1,627 MBoe through one sale of mineral and royalty interests located in the Permian Basin; and • positive volume revisions of approximately 2,581 MBoe attributable primarily to increased recovery in close proximity to our mineral and royalty interests, partially offset by negative revisions of approximately 2,434 MBoe, attributable primarily to operator development timing and revision of existing proved locations. Standardized Measure of Discounted Future Net Cash Flows Guidelines prescribed in FASB’s Accounting Standards Codification (“ASC”) Topic 932 Extractive Industries—Oil and Gas, have been followed for computing a standardized measure of future net cash flows and changes therein relating to estimated proved reserves. Future cash inflows are determined by applying prices and costs, including transportation, quality and basis differentials, to the year-end The assumptions used to compute the standardized measure are those prescribed by the FASB and the SEC. These assumptions do not necessarily reflect Brigham Resources’ expectations of actual revenues to be derived from those reserves, nor their present value. The limitations inherent in the reserve quantity estimation process, as discussed previously, are equally applicable to the standardized measure computations since these reserve quantity estimates are the basis for the valuation process. Reserve estimates are inherently imprecise and estimates of new discoveries and undeveloped locations are more imprecise than estimates of established proved producing oil and gas properties. Accordingly, these estimates are expected to change as future information becomes available. The standardized measure excludes federal income taxes as Brigham Resources is a limited liability company and not subject to federal income taxes; however, Brigham Resources is subject to state taxes. The following summary sets forth the future net cash flows relating to proved oil and gas reserves based on the standardized measure prescribed in ASC Topic 932: For the Year Ended 2018 2017 (in thousands) Future crude oil, natural gas and NGL sales $ 1,049,141 $ 595,874 Future severance tax and ad valorem taxes (70,248 ) (40,225 ) Future income tax expense (144,421 ) (1,151 ) Future net cash flows 834,472 554,498 10% annual discount (391,013 ) (238,030 ) Standardized measure of discounted future net cash flows $ 443,459 $ 316,468 The following prices were used in the determination of standardized measure: For the Year Ended 2018 2017 Oil (per Bbl) $ 61.31 $ 47.80 Natural gas (per MMBtu) 2.51 2.74 NGLs (per Bbl) 23.98 18.56 These prices were based on the 12-month first-of-month The principal sources of change in the standardized measure of discounted future net cash flows are: For the Year Ended 2018 2017 (in thousands) Standardized measure of discounted future net cash flows, beginning of the year $ 316,468 $ 185,752 Changes in the year resulting from: Sales, less production costs and taxes (52,278 ) (26,711 ) Revisions of previous quantity estimates (22,942 ) 4,894 Extensions, discoveries and other additions 71,668 56,511 Net change in prices and production costs 71,770 30,565 Accretion of discount 31,713 18,612 Purchase of reserves in place 148,580 79,190 Divestitures of reserves in place — (26,742 ) Net change in income Tax (75,369 ) (298 ) Timing differences and other (46,151 ) (5,305 ) Standardized measure of discounted future net cash flows, end of the year $ 443,459 $ 316,468 Capitalized oil and natural gas costs The aggregate amounts of costs capitalized for oil and natural gas producing activities and related aggregate amounts of accumulated depletion follow: For the Year Ended 2018 2017 (in thousands) Oil and gas properties, at cost, using full cost method of accounting: Not subject to depletion $ 228,151 $ 168,691 Subject to depletion 289,851 152,354 Total oil and gas properties, at cost 518,002 321,045 Less accumulated depreciation, depletion and amortization (27,628 ) (14,210 ) Total oil and gas properties, net $ 490,374 $ 306,835 Costs incurred in oil and natural gas activities The following costs were incurred in oil and natural gas producing activities: For the Year Ended 2018 2017 (in thousands) Acquisition of properties Unevaluated $ 59,460 $ 50,224 Evaluated 137,496 51,862 Total $ 196,956 $ 102,086 |