Glossary

Non-GAAP Measures Year-End 2007

The following terms are considered non-GAAP measures as defined by the Securities and Exchange Commission. Management uses these measures to evaluate the Company’s performance versus the performance of other oil and gas producing companies, as well as to evaluate potential acquisitions.

Drill Bit Finding Costs

The total of costs incurred for development, exploration and acquisitions of unproved properties – other a

Drill Bit Reserves

The total of proved reserve extensions, additions and discoveries and revisions a, b

Drill Bit Reserve Finding Cost

Drill Bit Finding Costs divided by Drill Bit Reserves

Free Cash Flow

Operating Cash Flow less total maintenance and development expenditures required to maintain current production levels

Operating Cash Flow

Cash provided by operating activities before changes in operating assets and liabilities, exploration expense and significant cash flow effects of non-recurring items. Because of these adjustments, this cash flow statistic is different from cash provided by operating activities, as disclosed under GAAP and reconciled to operating cash flow as follows:

(in millions)
2007
2006
2005
2004
2003
Cash provided by operating activities $ 3,639 $ 2,859 $ 2,094 $ 1,217 $ 794
Changes in operating assets and liabilities 72 (5) 158 58 (4)
Exploration expensec 31 13 24 11 2
Current tax related to gain on distribution of royalty trust units – 211 – – –
Operating cash flow $ 3,742 $ 3,078 $ 2,276 $ 1,286 $ 792

 

Management believes operating cash flow is a better liquidity indicator for oil and gas producers because of the adjustments made to cash provided by operating activities, explained as follows:

  • Adjustment for changes in operating assets and liabilities eliminates fluctuations primarily related to the timing of cash receipts and disbursements, which can vary from period-to-period because of conditions the Company cannot control (for example, the day of the week on which the last day of the period falls), and results in attributing cash flow to operations of the period that provided the cash flow.
  • Adjustment for exploration expense is to provide an amount comparable to operating cash flow for full cost companies and to eliminate the effect of a discretionary expenditure that is part of the Company’s capital budget.
  • Adjustment for the significant cash flow effects of non-recurring items.
Upside Potential or Additional Resource

Reserves beyond proved reservesa, which includes probable and possible reserves that are potentially recoverable through additional drilling or recovery techniques. Only proved reserves are disclosed in financial statements prepared in accordance with GAAP, and SEC guidelines prohibit disclosure of these potentially recoverable reserves in filings with the SEC. Management believes it is appropriate to disclose these potentially recoverable reserves in certain communications with investors to provide reserve estimates associated with our inventory of future drill well locations.

a As disclosed in Note 15 to Consolidated Financial Statements
b As calculated on a natural gas equivalent (Mcfe) basis
c Net of dry hole expense excluded from cash provided by operating activities beginning in 2006

Bbls Barrels (of oil or NGLs)
Bcf Billion cubic feet (of gas)
Bcfe Billion cubic feet of natural gas equivalent
CBM Coal bed methane
LNG Liquified natural gas
MBbls Thousand barrels (of oil or NGLs)
MMBOE Million barrels of oil equivalent
Mcf Thousand cubic feet (of gas)
Mcfe Thousand cubic feet of natural gas equivalent
MMcf Million cubic feet (of gas)
MMcfe Million cubic feet of natural gas equivalent
Tcfe Trillion cubic feet of natural gas equivalent

One barrel of oil is the energy equivalent of six Mcf of natural gas