Zargon's reserves are characterized by a high developed producing component. Proved developed producing reserves represent 93 percent of total proved reserves while proved and probable developed reserves account for 75 percent of total proved and probable reserves. For the Little Bow ASP project, McDaniel has assigned 4.39 million barrels of oil equivalent reserves in the probable undeveloped category, which represents 83 percent of the undeveloped reserves and 14 percent of Zargon's total proved and probable reserves assignment.
FINDING, DEVELOPMENT AND ACQUISITION COSTS:
We have presented finding and development costs below both including and excluding acquisitions and dispositions. While NI 51-101 requires that the effects of acquisitions and dispositions be excluded, we have included these items because we believe that acquisitions and dispositions can have a significant impact on our ongoing reserve replacement costs and that excluding these amounts could result in an inaccurate portrayal of our cost structure.
For 2012, Zargon's proved and probable finding, development and acquisition ("FD&A") costs, taking into account reserve revisions and changes in estimated future development capital during the period were not meaningful due to net dispositions and natural gas reserve write downs. For the purposes of this calculation, the $30.2 million of 2012 net capital additions was combined with a decrease in estimated future development capital for proved and probable reserves of $5.3 million ($123.5 million at December 31, 2012 compared to $128.8 million at December 31, 2011). More than 80 percent of Zargon's 2012 year end future capital costs are attributed to the Little Bow ASP project.
Excluding acquisitions (and dispositions), Zargon's 2012 proved and probable finding and development ("F&D") costs were $61.82 per barrel of oil equivalent. Considering that essentially all of Zargon's 2012 capital program was directed to oil projects, it is insightful to calculate Zargon's proved and probable F&D costs on an "oil only" basis ($58.2 million of conventional capital expenditures plus $6.5 million of ASP capital expenditures, less a $5.3 million change in future capital estimates with 2.02 million barrels of oil and liquid additions). Using this approach, proved and probable F&D "oil only" costs were $29.38 per barrel.
Similarly, Zargon's proved and probable FD&A costs on an "oil only" basis were $27.01 per barrel ($58.2 million of conventional capital expenditures plus $6.5 million of ASP capital expenditures, less $34.5 million of net dispositions and less a $5.3 million change in future capital estimates with 0.92 million barrels of oil and liquid additions). These "oil only' costs compare with Zargon's unaudited 2012 corporate average field oil netback (before interest, general and administrative and other costs) of more than $40 per barrel of oil (unaudited).
Proved and Probable Finding, Development and Acquisition Costs (1) 2012 2011 2010(4)----------------------------------------------------------------------------Total net capital expenditures ($ millions) - unaudited (2) 30.19 48.29 71.38Total net capital expenditures plus change in forecast future development costs ($ millions) (2) 24.85 144.52 79.62--------------------------------------------------------------------------------------------------------------------------------------------------------Proved and probable reserves (mmboe) Open 34.29 32.39 32.24 Discoveries and extensions 1.53 5.77 3.07 Acquisitions and dispositions (1.09) 0.06 1.53 Revisions (0.57) (0.59) (0.84) Production (2.97) (3.34) (3.61)---------------------------------------------------------------------------- Close 31.19 34.29 32.39--------------------------------------------------------------------------------------------------------------------------------------------------------Proved and probable FD&A costs ($/boe) (3) - 27.58 21.18Proved and probable three-year FD&A costs ($/boe) (3) 28.07 21.48 18.83Proved and probable F&D costs ($/boe) (3) 61.82 32.41 30.79Proved and probable three-year F&D costs ($/boe) (3) 35.35 30.06 24.80--------------------------------------------------------------------------------------------------------------------------------------------------------1. The aggregate of the exploration and development costs incurred in the most recent financial year and the change during that year in estimated future development costs generally will not reflect total finding and development costs related to reserves additions for that year.2. Amounts exclude additions for administrative assets.3. Amounts are calculated including the change in future development costs.4. 2010 numbers do not reflect any changes to accounting rules which may have occurred.
