Supplemental information relating to oil and natural gas producing activities (unaudited)

12 Months Ended

Dec. 31, 2014

Supplemental Information Relating To Oil And Natural Gas Producing Activities

Supplemental information relating to oil and natural gas producing activities (unaudited)

12. Supplemental information relating to oil and natural gas producing activities (unaudited)

Costs incurred in oil and natural gas property acquisition, exploration and development

Set forth below is certain information regarding the costs incurred for oil and gas property acquisition, development and exploration activities:

	Year Ended December 31,
	2014		2013
Property acquisition costs:
Unproved properties	$	—	$	—
Proved properties		—		—
Exploration costs		—		—
Development costs (1)		4,360,946		8,312,662
Total costs incurred	$	4,360,946	$	8,312,662

	(1)	For the years ended December 31, 2014 and 2013, development costs included ($508,711) and $51,290, respectively, in non-cash, asset retirement costs.

Results of operations for oil and natural gas producing activities

Set forth below is certain information regarding the results of operations for oil and gas producing activities:

	Year Ended December 31,
	2014			2013
Revenues	$	12,352,299		$	13,125,960
Production costs		2,287,908			2,300,899
Depletion and impairment		9,154,536			4,941,614
Accretion expense		185,773			148,364
Natural gas marketing		102,736			78,211
Production taxes		999,395			1,246,153
Results of operations	$	(378,049	)	$	4,410,719

Proved reserves

Cawley, Gillespie and Associates, Inc, independent petroleum engineers estimated 100% of the proved reserve information for the Company properties as of December 31, 2014 and 2013. Each year’s estimate of proved reserves and related valuations were also prepared in accordance with then-current provisions of ASC 932, Extractive Activities.

Estimates of proved reserves are inherently imprecise and are continually subject to revision based on production history, results of additional exploration and development, price changes and other factors. All of the Company’s estimated oil and natural gas reserves are attributable to properties within the United States. A summary of the Company’s changes in quantities of proved oil and natural gas reserves for the years ended December 31, 2014 and 2013 are as follows:

	Oil (MBbl)			Natural Gas (MMcf)			Total (Mboe)
December 31, 2012		1,271			1,695			1,554
Acquisitions		—			—			—
Extensions and Discoveries		371			817			507
Revisions to Previous Estimates		11			906			161
Production		(123	)		(283	)		(170	)
December 31, 2013		1,530			3,135			2,052
Acquisitions		—			—			—
Extensions and Discoveries		250			477			330
Revisions to Previous Estimates		43			503			127
Production		(128	)		(375	)		(190	)
December 31, 2014		1,695			3,740			2,319

Proved Developed Reserves
December 31, 2013		804			2,215			1,173
December 31, 2014		916			2,691			1,364

Proved Undeveloped Reserves
December 31, 2013		726			920			879
December 31, 2014		780			1,050			955

Standardized measure of discounted future net cash flows relating to proved reserves

Future cash inflows were computed by applying the average on the closing price on the first day of each month for the 12-month period prior to December 31, 2014 to estimated future production. Future production and development costs are computed by estimating the expenditures to be incurred in developing and producing the proved oil and natural 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 appropriate year-end tax rates to future pre-tax net cash flows relating to proved oil and natural gas reserves, less the tax basis of properties involved.

Future income tax expenses give effect to permanent differences, tax credits and loss carryforwards relating to the proved oil and natural gas reserves. Future net cash flows are discounted at a rate of 10% annually to derive the standardized measure of discounted future net cash flows. This calculation procedure does not necessarily result in an estimate of the fair market value of the Company’s oil and natural gas properties.

The standardized measure of discounted future net cash flows relating to proved oil and natural gas reserves are as follows:

	Year Ended December 31,
	2014			2013
Future cash inflows	$	172,561,969		$	153,544,250
Future production costs		(48,818,696	)		(41,381,543	)
Future development costs		(18,080,062	)		(18,821,422	)
Future income tax expense		(26,902,690	)		(20,243,102	)
Future net cash flows		78,760,521			73,098,179
10% annual discount for estimated timing of cash flows		(41,988,630	)		(36,817,148	)
Standardized measure of discounted future net cash flows	$	36,771,891		$	36,281,031

Changes in standardized measure of discounted future net cash flows

The changes in the standardized measure of discounted future net cash flows relating to proved oil and natural gas reserves are as follows:

	Year Ended December 31,
	2014			2013
Balance, beginning of year	$	36,281,031		$	28,147,572
Net change in sales and transfer prices and in production (lifting) costs related to future production		1,728,874			9,374,986	)
Changes in estimated future development costs		5,076,840			4,042,730
Sales and transfers of oil and natural gas produced during the period		(8,962,260	)		(10,825,061	)
Net change due to extensions and discoveries		8,255,840			12,107,955	)
Net change due to revisions in quantity estimates		3,182,507			3,883,464
Previously estimated development costs incurred during the period		(4,360,946	)		(8,312,662	)
Accretion of discount		4,899,710			2,747,142
Other		(2,791,193	)		(672,750	)
Net change in income taxes		(6,538,512	)		(4,212,345	)
Balance, end of year	$	36,771,891		$	36,281,031

CROSS BORDER RESOURCES, INC. 10-K