COP » Topics » Oil and Gas Operations

This excerpt taken from the COP 10-K filed Feb 23, 2007.
Oil and Gas Operations (Unaudited)

In accordance with SFAS No. 69, “Disclosures about Oil and Gas Producing Activities,” and regulations of the U.S. Securities and Exchange Commission (SEC), we are making certain supplemental disclosures about our oil and gas exploration and production operations.  While this information was developed with reasonable care and disclosed in good faith, it is emphasized that some of the data is necessarily imprecise and represents only approximate amounts because of the subjective judgments involved in developing such information.  Accordingly, this information may not necessarily represent our current financial condition or our expected future results.

These disclosures include information about our consolidated oil and gas activities and our proportionate share of our equity affiliates’ oil and gas activities, covering both those in our Exploration and Production segment, as well as in our LUKOIL Investment segment.  As a result, amounts reported as Equity Affiliates in Oil and Gas Operations may differ from those shown in the individual segment disclosures reported elsewhere in this report.  The data included for the LUKOIL Investment segment reflects the company’s estimated share of OAO LUKOIL’s (LUKOIL) amounts.  Because LUKOIL’s accounting cycle close and preparation of U.S. GAAP financial statements occur subsequent to our reporting deadline, our equity share of financial information and statistics for our LUKOIL investment are estimated based on current market indicators, historical production and cost trends of LUKOIL, and other objective data.  Once the difference between actual and estimated results is known, an adjustment is recorded.  Our estimated year-end 2006 reserves related to our equity-method ownership interest in LUKOIL were based on LUKOIL’s year-end 2005 reserves (adjusted for known additions, license extensions, dispositions, and other related information) and included adjustments to conform them to ConocoPhillips’ reserve policy and provided for estimated 2006 production.  Other financial information and statistics were based on market indicators, historical production trends of LUKOIL, and other factors.

The information about our proportionate share of equity affiliates is necessary for a full understanding of our operations because equity affiliate operations are an integral part of the overall success of our oil and gas operations.

Our proved reserves include estimated quantities related to production sharing contracts (PSCs), which are reported under the “economic interest” method and are subject to fluctuations in prices of crude oil, natural gas and natural gas liquids; recoverable operating expenses; and capital costs.  If costs remain stable, reserve quantities attributable to recovery of costs will change inversely to changes in commodity prices.  For example, if prices go up then our applicable reserve quantities would decline.  At December 31, 2006, approximately 14 percent of our total proved reserves (consolidated operations and our share of equity affiliates) were under PSCs, primarily in our Asia Pacific geographic reporting area.

Our disclosures by geographic area for our consolidated operations include the United States (U.S.), Canada, Europe (primarily Norway and the United Kingdom), Asia Pacific, Middle East and Africa, Russia and Caspian, and Other Areas (primarily South America).  In these supplemental oil and gas disclosures, where we use equity accounting for operations that have proved reserves, these operations are shown separately and designated as Equity Affiliates, and include Canada, Middle East and Africa, Russia and Caspian, and Other Areas.  The Russia and Caspian area includes our share of Polar Lights Company, OOO Naryanmarneftegaz, and LUKOIL.  Other Areas consists of our Petrozuata and Hamaca heavy-oil projects in Venezuela.

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Venezuelan government officials have made public statements about increasing ownership interests in heavy-oil projects required to give the national oil company of Venezuela, Petroleos de Venezuela S.A. (PDVSA) control and up to 60 percent ownership interests.  On January 31, 2007, Venezuela’s National Assembly passed an “enabling law” allowing the president to pass laws by decree on certain matters, including those associated with heavy-oil production from the Orinoco Oil Belt.  PDVSA holds a 49.9 percent interest in the Petrozuata heavy-oil project and a 30 percent interest in the Hamaca heavy-oil project.  We have a 50.1 percent interest and a 40 percent interest in the Petrozuata and Hamaca projects, respectively.  The impact, if any, of these statements or other potential government actions, on our Petrozuata and Hamaca projects is not determinable at this time.

This excerpt taken from the COP 10-K filed Feb 27, 2006.
Oil and Gas Operations (Unaudited)

 

In accordance with SFAS No. 69, “Disclosures about Oil and Gas Producing Activities,” and regulations of the U.S. Securities and Exchange Commission (SEC), we are making certain supplemental disclosures about our oil and gas exploration and production operations.  While this information was developed with reasonable care and disclosed in good faith, it is emphasized that some of the data is necessarily imprecise and represents only approximate amounts because of the subjective judgments involved in developing such information.  Accordingly, this information may not necessarily represent our current financial condition or our expected future results.

 

These disclosures include information about our consolidated oil and gas activities and our proportionate share of our equity affiliates’ oil and gas activities, covering both those in our Exploration and Production segment, as well as in our LUKOIL Investment segment.  As a result, amounts reported as Equity Affiliates in Oil and Gas Operations may differ from those shown in the individual segment disclosures reported elsewhere in this report.  The data included for the LUKOIL Investment segment reflects the company’s estimated share of LUKOIL’s amounts.  Because LUKOIL’s accounting cycle close and preparation of U.S. GAAP financial statements occurs subsequent to our accounting cycle close, our equity share of financial information and statistics from our LUKOIL investment are estimates for 2005 and 2004.  Our estimated year-end 2005 reserves related to our equity investment in LUKOIL were based on LUKOIL’s year-end 2004 reserves (adjusted for known additions, license extensions, dispositions, and public information) and included adjustments to conform them to ConocoPhillips’ reserve policy and provided for estimated 2005 production.  Other financial information and statistics were based on market indicators, historical production trends of LUKOIL, and other factors.  Any differences between the estimate and actual financial information and statistics will be recorded in a subsequent period.

 

The information about our proportionate share of equity affiliates is necessary for a full understanding of our operations because equity affiliate operations are an integral part of the overall success of our oil and gas operations.

 

Our disclosures by geographic area for our consolidated operations include the United States (U.S.), European North Sea (Norway and the United Kingdom), Asia Pacific, Canada, Middle East and Africa, and Other Areas.  In these supplemental oil and gas disclosures, where we use equity accounting for operations that have proved reserves, these operations are shown separately and designated as Equity Affiliates, and include Venezuela, and Russia and Other Areas.

 

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EXCERPTS ON THIS PAGE:

10-K
Feb 23, 2007
10-K
Feb 27, 2006

"Oil and Gas Operations" elsewhere:

Occidental Petroleum (OXY)
Energen (EGN)
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