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Supplementary Information | 12 Months Ended
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Dec. 31, 2013
Organization Consolidation And Presentation Of Financial Statements [Abstract] |
Supplementary Information | SUPPLEMENTARY INFORMATION CAPITALIZED COSTS RELATING TO OIL AND GAS PRODUCING ACTIVITIES Years Ended December 31, 2013 and 2012 (Unaudited)
|  | As of December 31, |
(Thousands of dollars) |  | 2013 |  |  | 2012 |
Proved Developed oil and gas properties |  | $ | 362,186 |  |  | $ | 336,135 |
Proved Undeveloped oil and gas properties |  |  | 1,937 |  |  |  | 2,069 |
Unproved oil and gas properties |  |  | — |  |  |  | — |
Total Capitalized Costs |  |  | 364,123 |  |  |  | 338,204 |
Accumulated depreciation, depletion and valuation allowance |  |  | 169,100 |  |  |  | 150,276 |
Net Capitalized Costs |  | $ | 195,023 |  |  | $ | 187,928 |
COSTS INCURRED IN OIL AND GAS PROPERTY ACQUISITION, EXPLORATION AND DEVELOPMENT ACTIVITIES Years Ended December 31, 2013 and 2012 (Unaudited)
|  | Year Ended December 31, |
(Thousands of dollars) |  | 2013 |  |  | 2012 |
Acquisition of Properties, Developed |  | $ | 7 |  |  | $ | 6,482 |
Acquisition of Properties, Undeveloped |  |  | — |  |  |  | 2,030 |
Exploration Costs |  |  | 8 |  |  |  | 10 |
Development Costs |  |  | 25,912 |  |  |  | 66,671 |
STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS RELATING TO PROVED OIL AND GAS RESERVES Years Ended December 31, 2013 and 2012 (Unaudited)
|  | As of December 31, |
(Thousands of dollars) |  | 2013 |  |  | 2012 |
Future cash inflows |  | $ | 1,880,389 |  |  | $ | 1,524,137 |
Future production costs |  |  | (769,172 | ) |  |  | (673,629 | )
Future development costs |  |  | (313,754 | ) |  |  | (179,568 | )
Future income tax expenses |  |  | (234,191 | ) |  |  | (186,072 | )
Future Net Cash Flows |  |  | 563,272 |  |  |  | 484,868 |
10% annual discount for estimated timing of cash flows |  |  | (325,044 | ) |  |  | (271,595 | )
Standardized Measure of Discounted Future Net Cash Flows |  | $ | 238,228 |  |  | $ | 213,273 |
See accompanying Notes to Supplementary Information PRIMEENERGY CORPORATION AND SUBSIDIARIES SUPPLEMENTARY INFORMATION STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS AND CHANGES THEREIN RELATING TO PROVED OIL AND GAS RESERVES Years Ended December 31, 2013 and 2012 (Unaudited) The following are the principal sources of change in the standardized measure of discounted future net cash flows during 2013 and 2012:
|  | Year Ended December 31, |
(Thousands of dollars) |  | 2013 |  |  | 2012 |
Sales of oil and gas produced, net of production costs |  | $ | (48,976 | ) |  | $ | (48,673 | )
Net changes in prices and production costs |  |  | (10,149 | ) |  |  | 504 |
Extensions, discoveries and improved recovery |  |  | 218,648 |  |  |  | 164,557 |
Revisions of previous quantity estimates |  |  | (733 | ) |  |  | 40,964 |
Net change in development costs |  |  | (129,672 | ) |  |  | (145,382 | )
Reserves sold |  |  | — |  |  |  | — |
Reserves purchased |  |  | — |  |  |  | 6,563 |
Accretion of discount |  |  | 21,327 |  |  |  | 18,451 |
Net change in income taxes |  |  | (23,007 | ) |  |  | (5,952 | )
Changes in production rates (timing) and other |  |  | (2,483 | ) |  |  | (2,267 | )
Net change |  |  | 24,955 |  |  |  | 28,765 |
Standardized measure of discounted future net cash flow: |  |  |  |  |  |  |  |
Beginning of year |  |  | 213,273 |  |  |  | 184,508 |
End of year |  | $ | 238,228 |  |  | $ | 213,273 |
See accompanying Notes to Supplementary Information PRIMEENERGY CORPORATION AND SUBSIDIARIES SUPPLEMENTARY INFORMATION RESERVE QUANTITY INFORMATION Years Ended December 31, 2013 and 2012 (Unaudited)
|  | As of December 31, |
|  | 2013 |  |  | 2012 |
|  | Oil (MBbls) |  |  | NGLs (MBbls) |  |  | Gas (MMcf) |  |  | Oil (MBbls) |  |  | NGLs (MBbls) |  |  | Gas (MMcf) |
Proved Developed Reserves: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning of year |  |  | 7,178 |  |  |  | 2,909 |  |  |  | 27,833 |  |  |  | 6,418 |  |  |  | — |  |  |  | 43,631 |
Extensions, discoveries and improved recovery |  |  | 87 |  |  |  | — |  |  |  | 402 |  |  |  | 224 |  |  |  | 49 |  |  |  | 1,000 |
Revisions of previous estimates |  |  | (361 | ) |  |  | (712 | ) |  |  | 6,456 |  |  |  | 252 |  |  |  | 2,860 |  |  |  | (15,821 | )
Converted from undeveloped reserves |  |  | 513 |  |  |  | 199 |  |  |  | 1,207 |  |  |  | 861 |  |  |  | — |  |  |  | 3,527 |
Reserves sold |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Reserves purchased |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 168 |  |  |  | — |  |  |  | 211 |
Production |  |  | (730 | ) |  |  | (173 | ) |  |  | (4,270 | ) |  |  | (745 | ) |  |  | — |  |  |  | (4,715 | )
End of year |  |  | 6,687 |  |  |  | 2,223 |  |  |  | 31,628 |  |  |  | 7,178 |  |  |  | 2,909 |  |  |  | 27,833 |
Proved Undeveloped Reserves: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning of year |  |  | 5,907 |  |  |  | 2,877 |  |  |  | 12,613 |  |  |  | 2,435 |  |  |  | — |  |  |  | 9,765 |
Extensions, discoveries and improved recovery |  |  | 4,536 |  |  |  | 1,541 |  |  |  | 9,538 |  |  |  | 3,446 |  |  |  | 1,401 |  |  |  | 6,158 |
Revisions of previous estimates |  |  | 864 |  |  |  | (512 | ) |  |  | (1,172 | ) |  |  | 887 |  |  |  | 1,476 |  |  |  | 217 |
Converted to developed reserves |  |  | (513 | ) |  |  | 199 |  |  |  | (1,207 | ) |  |  | (861 | ) |  |  | — |  |  |  | (3,527 | )
Reserves sold |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Reserves purchased |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
End of year |  |  | 9,066 |  |  |  | 3,707 |  |  |  | 19,772 |  |  |  | 5,907 |  |  |  | 2,877 |  |  |  | 12,613 |
Total Proved Reserves at the End of the Year |  |  | 15,753 |  |  |  | 5,930 |  |  |  | 51,400 |  |  |  | 13,085 |  |  |  | 5,786 |  |  |  | 40,446 |
RESULTS OF OPERATIONS FROM OIL AND GAS PRODUCING ACTIVITIES Years Ended December 31, 2013 and 2012 (Unaudited)
|  | Year Ended December 31, |
(Thousands of dollars) |  | 2013 |  |  | 2012 |
Revenue: |  |  |  |  |  |  |  |
Oil and gas sales |  | $ | 92,785 |  |  | $ | 88,336 |
Costs and Expenses: |  |  |  |  |  |  |  |
Lease operating expenses |  |  | 43,809 |  |  |  | 39,868 |
Exploration costs |  |  | 8 |  |  |  | 10 |
Depreciation, depletion and accretion |  |  | 19,218 |  |  |  | 19,883 |
Income tax expense |  |  | 10,012 |  |  |  | 8,941 |
Total Costs and Expenses |  |  | 73,047 |  |  |  | 68,702 |
Results of Operations From Producing Activities (excluding corporate overhead and interest costs) |  | $ | 19,738 |  |  | $ | 19,634 |
See accompanying Notes to Supplementary Information PRIMEENERGY CORPORATION AND SUBSIDIARIES NOTES TO SUPPLEMENTARY INFORMATION (Unaudited) 1. Presentation of Reserve Disclosure Information Reserve disclosure information is presented in accordance with U.S. generally accepted accounting principles. The Company’s reserves include amounts attributable to non-controlling interests in the Partnerships. These interests represent less than 10% of the Company’s reserves. 2. Determination of Proved Reserves The estimates of the Company’s proved reserves were determined by an independent petroleum engineer in accordance with U.S. generally accepted accounting principles. The estimates of proved reserves are inherently imprecise and are continually subject to revision based on production history, results of additional exploration and development and other factors. Estimated future net revenues were computed by reserves, less estimated future development and production costs based on current costs. Proved reserve quantity estimates are subject to numerous uncertainties inherent in the estimation of quantities of proved reserves and in the projection of future rates of production and the timing of development expenditures. The accuracy of such estimates is a function of the quality of available data and of engineering and geological interpretation and judgment. Results of subsequent drilling, testing and production may cause either upward of downward revision of previous estimates. Further, the volumes considered to be commercially recoverable fluctuate with changes in prices and operating costs. The Company emphasizes that proved reserve estimates are inherently imprecise and that estimates of new discoveries are more imprecise than those of currently producing oil and gas properties. Accordingly, these estimates are expected to change as additional information becomes available in the future. 3. Results of Operations from Oil and Gas Producing Activities The results of operations from oil and gas producing activities were prepared in accordance with U.S. generally accepted accounting principles. General and administrative expenses, interest costs and other unrelated costs are not deducted in computing results of operations from oil and gas activities. 4. Standardized Measure of Discounted Future Net Cash Flows and Changes Therein Relating to Proved Oil and Gas Reserves The standardized measure of discounted future net cash flows relating to proved oil and gas reserves and the changes of standardized measure of discounted future net cash flows relating to proved oil and gas reserves were prepared in accordance with U.S. generally accepted accounting principles. Future cash inflows are computed as described in Note 2 by applying current prices to year-end quantities of proved reserves. Future production and development costs are computed estimating the expenditures to be incurred in developing and producing the oil and gas reserves at year-end, based on year-end costs and assuming continuation of existing economic conditions. Future income tax expenses are calculated by applying the year-end U.S. tax rate to future pre-tax cash inflows relating to proved oil and gas reserves, less the tax basis of properties involved. Future income tax expenses give effect to permanent differences and tax credits and allowances relating to the proved oil and gas reserves. Future net cash flows are discounted at a rate of 10% annually (pursuant to applicable guidance) to derive the standardized measure of discounted future net cash flows. This calculation does not necessarily represent an estimate of fair market value or the present value of such cash flows since future prices and costs can vary substantially from year-end and the use of a 10% discount figure is arbitrary. 5. Changes in Reserves The 2013 and 2012 extensions and discoveries reflect the successful drilling activity in the Company’s West Texas and Mid-Continent areas. The Company is employing technologies to establish proved reserves that have been demonstrated to provide consistent results capable of repetition. The technologies and economic data being used in the estimation of its proved reserves include, but are not limited to, electrical logs, radioactivity logs, geologic maps, production data and well test data. The estimated reserves of wells with sufficient production history are estimated using appropriate decline curves. Estimated reserves of producing wells with limited production history and for undeveloped locations are estimated using performance data from analogous wells in the area. These wells are considered analogous based on production performance from the same formation and with similar completion techniques.

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