2012 Annual Report - Stone Energy Corporation

well; and (ii) through installed extraction technology equipment and infrastructure operational at the time of the reserves estimateif the extraction is by means not involving a well.Proved oil and natural gas reserves. Those quantities of oil and gas, which, by analysis of geoscience and engineering data, canbe estimated with reasonable certainty to be economically producible—from a given date forward, from known reservoirs, andunder existing economic conditions, operating methods, and government regulations—prior to the time at which contractsproviding the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whetherdeterministic or probabilistic methods are used for the estimation. The project to extract hydrocarbons must have commenced orthe operator must be reasonably certain that it will commence the project within a reasonable time. Reasonable certainty is definedas “much more likely to be achieved than not”.Proved undeveloped reserves. Proved reserves that are expected to be recovered from new wells on undrilled acreage, or fromexisting wells where a relatively major expenditure is required for recompletion.Standardized measure of discounted future net cash flows. The standardized measure represents value-based information about anenterprise’s proved oil and gas reserves based on estimates of future cash flows, including income taxes, from production ofproved reserves assuming continuation of certain economic and operating conditions. Future cash flows are based on a 12-monthaverage price, calculated as the unweighted arithmetic average of the first-day-of-the-month price for each month within the 12-month period prior to the end of the reporting period.Undeveloped acreage. Lease acreage on which wells have not been drilled or completed to a point that would permit theproduction of economic quantities of oil and gas regardless of whether such acreage contains proved reserves.Working interest. An operating interest that gives the owner the right to drill, produce and conduct operating activities on theproperty and to receive a share of production.G-2