Supplemental Information about Oil & Natural Gas Producing Activities (Unaudited)

The reserve estimates were made in accordance with oil and natural gas reserve estimation and disclosure authoritative accounting guidance issued by the Financial Accounting Standards Board effective for reporting periods ending on or after December 31, 2009. This guidance was issued to align the accounting oil and natural gas reserve estimation and disclosure requirements with the requirements in the SEC's "Modernization of Oil and Gas Reporting" rule, which was also effective for annual reports for fiscal years ending on or after December 31, 2009.

The above-mentioned rules include updated definitions of proved oil and natural gas reserves, proved undeveloped oil and natural gas reserves, oil and natural gas producing activities and other terms used in estimating proved oil and natural gas reserves. Proved oil and natural gas reserves were calculated based on the prices for oil and natural gas during the twelve month period before the reporting date, determined as an unweighted arithmetic average of the first-day-of-the-month price for each month within such period. This average price is also used in calculating the aggregate amount and changes in future cash inflows related to the standardized measure of discounted future cash flows. In addition, the SEC generally requires that reserves classified as proved undeveloped be capable of conversion into proved developed within five years of classification unless specific circumstances justify a longer time.

Changes in Estimated Reserve Quantities

The following table sets forth the Company's estimates of its net proved, net proved developed and net proved undeveloped oil and natural gas reserves as of December 31, 2012, 2011 and 2010, and changes in its net proved oil and natural gas reserves for the years then ended. For the years presented, the estimates of proved reserves and related valuations were based 100% on reports prepared by the Company's independent petroleum engineers, DeGolyer and MacNaughton (D&M).



	2012						2011						2010
	Oil MBOE		Natural Gas MMcf		MBOE		Oil MBOE		Natural Gas MMcf		MBOE		Oil MBOE		Natural Gas MMcf		MBOE
Total proved reserves:
Beginning of year	185,880		534,279		274,926		166,181		630,192		271,213		129,940		632,178		235,303
Revision of previous estimates	12,145		(205,845	)	(22,162	)	(4,054	)	(146,349	)	(28,446	)	4,288		(46,860	)	(3,522	)
Improved recovery	—		—		—		—		—		—		1,700		—		1,700
Extensions and discoveries	8,459		100,129		25,148		19,601		65,992		30,600		12,774		43,469		20,019
Property sales	(556	)	—		(556	)	—		—		—		—		—		—
Production	(10,024	)	(19,784	)	(13,321	)	(9,041	)	(23,907	)	(13,025	)	(7,925	)	(23,989	)	(11,923	)
Purchase of reserves in place	8,304		16,740		11,094		13,193		8,351		14,584		25,404		25,394		29,636
End of year	204,208		425,519		275,129		185,880		534,279		274,926		166,181		630,192		271,213

Proved developed reserves	118,937		187,668		150,216		107,849		221,606		144,783		88,917		268,566		133,678
Proved undeveloped reserves	85,271		237,851		124,913		78,031		312,673		130,143		77,264		361,626		137,535
Total proved reserves	204,208		425,519		275,129		185,880		534,279		274,926		166,181		630,192		271,213

Notable changes in proved reserves for the years ended December 31, 2012, 2011 and 2010 included:


•	Purchase of Reserves in Place. In 2012, the Company acquired reserves of 11,094 MBOE primarily in Utah and the Permian. In 2011 and 2010, the Company acquired reserves of 14,584 MBOE and 29,636 MBOE primarily in the Wolfberry trend in the Permian. See Note 2 to the Financial Statements.

•

Extensions and Discoveries. In 2012, the Company had a total of 25,148 MBOE of extensions and discoveries, which were primarily due to successful drilling in Utah and improved performance in the Piceance. In 2011, the Company had a total of 30,600 MBOE of extensions and discoveries, which were primarily due to successful drilling and completion activities in the Diatomite, McKittrick, Utah, Piceance and Permian assets. In 2010, the Company had a total of 20,019 MBOE of extensions and discoveries, which were primarily due to the successful drilling and completion activities in the Diatomite, Permian, Utah and E. Texas assets.

•

Revisions to Previous Estimates. In 2012, the Company had negative revisions of 22,162 MBOE, which were primarily in Piceance and E. Texas due to the SEC's five-year rule and pricing, offset by positive revisions due to development drilling in Diatomite, McKittrick, and the Permian. In 2011, the Company had negative revisions of 28,446 MBOE, which were primarily due to removing proved undeveloped reserves related to assets that reached aging limitations, as mandated by the SEC and negative performance revisions. Specifically, the decrease is due to a 19,632 MBOE decrease in E. Texas, a 5,779 MBOE decrease in Piceance and a 2,576 MBOE decrease in Utah. In 2010, the Company had negative revisions of 3,522 MBOE, which were primarily due to negative performance revisions and the Company's future development plans. Specifically, the decrease is due to a 3,666 MBOE decrease in E. Texas, a 3,890 MBOE decrease in the Piceance and a 840 MBOE decrease in Uinta, offset by a 971 MBOE increase in the Permian and a 3,903 MBOE increase in California.


•	Property Sales. In 2012, the Company had total reserve sales of 556 MBOE from sale of its Nevada assets. See Note 2 to the Financial Statements.

Standardized Measure of Discounted Future Net Cash Flows

Future oil and natural gas sales are calculated applying the prices used in estimating the Company's proved oil and natural gas reserves to the year-end quantities of those reserves. Future production and development costs, which include costs related to plugging of wells, removal of facilities and equipment and site restoration, are calculated by estimating the expenditures to be incurred in producing and developing the proved oil and natural gas reserves at the end of each year, based on year-end costs and assuming continuation of existing economic conditions. Future income tax expenses are computed by applying the appropriate year-end statutory income tax rates to the estimated future pre-tax net cash flows relating to proved oil and natural gas reserves, less the tax bases of the properties involved. The future income tax expenses give effect to income tax deductions, credits and allowances relating to the proved oil and natural gas reserves. All cash flow amounts, including income taxes, are discounted at 10%.

The following table presents the standardized measure of discounted future net cash flows related to proved oil and natural gas reserves:



	Year Ended December 31,
(in thousands)	2012			2011			2010
Future cash inflows	$	19,738,729		$	19,568,628		$	14,354,627
Future production costs	(5,884,891		)	(5,226,044		)	(4,446,183		)
Future development costs	(2,164,780		)	(1,975,429		)	(1,789,001		)
Future income tax expense	(3,344,024		)	(3,770,512		)	(2,272,184		)
Future net cash flows	8,345,034			8,596,643			5,847,259
10% annual discount for estimated timing of cash flows	(4,511,619		)	(4,561,364		)	(3,048,103		)
Standardized measure of discounted future net cash flows	$	3,833,415		$	4,035,279		$	2,799,156
Average price during the 12-month period:(1)
Oil ($/BOE)	$	90.66		$	93.72		$	69.04
Natural gas ($/Mcf)	2.88			4.02			4.57
BOE ($/BOE)	$	71.74		$	71.18		$	52.93

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(1)	Differences between the average benchmark prices and the average prices used in the calculation of the standardized measure are attributable to adjustments made for transportation, quality and basis differentials.

The present value (at a 10% annual discount) of future net cash flows from the Company’s proved reserves is not necessarily the same as the current market value of its estimated oil and natural gas reserves. The Company bases the estimated discounted future net cash flows from its proved reserves on prices and costs in effect on the day of estimate in accordance with the applicable accounting guidance. However, actual future net cash flows from its oil and natural gas properties will also be affected by factors such as actual prices the Company receives for oil and natural gas, the amount and timing of actual production, supply of and demand for oil and natural gas and changes in governmental regulations or taxation.

The timing of both the Company’s production and incurrence of expenses in connection with the development and production of oil and natural gas properties will affect the timing of actual future net cash flows from proved reserves, and thus their actual present value. In addition, the 10% annual discount factor the Company uses when calculating discounted future net cash flows may not be the most appropriate discount factor based on interest rates in effect from time to time and risks associated with the Company or the oil and natural gas industry in general.

A summary of changes in the standardized measure of discounted future net cash flows is as follows:



	Year ended December 31,
(in thousands)	2012			2011			2010
Standardized measure—beginning of year	$	4,035,279		$	2,799,156		$	1,445,747
Sales of oil and natural gas produced, net of production costs	(625,707		)	(599,679		)	(406,390		)
Revisions to estimates of proved reserves:
Net changes in sales prices and production costs	(786,022		)	1,473,454			1,724,212
Revisions of previous quantity estimates	743			(281,765		)	(49,784		)
Improved recovery	—			—			24,033
Extensions and discoveries	124,466			601,313			283,011
Change in estimated future development costs	(331,498		)	(274,122		)	(152,096		)
Purchases of reserves in place	114,094			164,383			307,205
Sales of reserves in place	(15,283		)	—			—
Development costs incurred during the period	497,036			433,660			144,086
Accretion of discount	570,505			383,418			184,917
Income taxes	323,128			(634,747		)	(593,272		)
Other	(73,326		)	(29,792		)	(112,513		)
Net (decrease) increase	(201,864		)	1,236,123			1,353,409
Standardized measure—end of year	$	3,833,415		$	4,035,279		$	2,799,156

The following table presents costs incurred in oil and natural gas property acquisition, exploration and development activities:



	Year ended December 31,
(in thousands)	2012		2011		2010
Property acquisitions
Proved properties	$	70,700	$	149,158	$	334,409
Unproved properties	10,686		6,632		—
Development	714,343		544,114		320,927
Exploration	16,405		627		2,310
Total(1)	$	812,134	$	700,531	$	657,646

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(1)The total above does not reflect $17.9 million, $29.1 million and $28.3 million of capitalized interest incurred in 2012, 2011 and 2010, respectively.