2005 Reserves
Under Securities and Exchange Commission (SEC) standards, oil and gas reserves are classified as "proved" if the reserves are recoverable with reasonable certainty "under existing economic and operating conditions."
Prevailing operating conditions in Venezuela at year-end 2005 effectively prohibited us from continuing the development of the reserves previously classified as proved undeveloped. Consequently, the undeveloped reserves reported by Harvest as proved undeveloped reserves at December 2004 no longer meet the SEC standard for proved reserves with regard to existing operating conditions.
Accordingly, we reduced our proved reserves by approximately 50 percent. 2005 year-end proved reserves, net to our 80 percent ownership interest, have declined to 36 million barrels of oil equivalent (MMBoe) at year-end 2005, from 84 MMBoe at December 2004. Approximately 10 MMBoe of this decline represents our 80 percent share of 2005 production.
The discounted future net cash flows – or aftertax present value of the cash flows – from Harvest's proved reserves, discounted at 10 percent as mandated by the SEC, were $329 million at December 2005, compared with $545 million at December 2004.
