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.