Supplemental Information On Oil And Gas Exploration And Production Activities (Unaudited) (Tables)

12 Months Ended

Dec. 31, 2015

Costs Incurred in Oil and Gas Producing Activities

The Company’s oil and gas activities for 2015, 2014 and 2013 were entirely within the United States of America. Costs incurred in oil and gas producing activities were as follows (in thousands):

	Years Ended December 31,
	2015		2014 ⁽¹⁾		2013
Acquisition cost:
Proved	$	4,508	$	74,728	$	51,488
Unproved		10,646		36,236		32,863

Exploration costs:
Exploratory drilling		—		—		64
Geological and geophysical		142		111		394

Development costs		56,862		75,105		32,511
Total additions	$	72,158	$	186,180	$	117,320

⁽¹⁾

Acquisition costs include the fair value of the legacy Earthstone proved properties equal to $22.1 million and $5.5 million of unproved properties that were added in the Exchange Agreement which was accounted for as a reserve acquisition. Acquisitions costs also included $34.7 million and $21.9 million in proved and unproved additions related to the 2014 Eagle Ford Acquisition.

Net Changes in Capitalized Exploratory Well Costs

The net changes in capitalized exploratory well costs were as follows (in thousands):

	December 31,
	2015		2014		2013
Balance, beginning of year	$	—	$	—	$	2,032

Additions to capitalized exploratory well costs pending the determination of proved reserves		—		—		64

Capitalized exploratory well costs charged to expense		—		—		(2,096	)

Balance, end of year	$	—	$	—	$	—

Summary of Changes in Quantities of Proved Oil and natural Gas Reserves

A summary of the Company’s changes in quantities of proved oil and natural gas reserves for the years ended December 31, 2015, 2014 and 2013 are as follows:

	Oil			Natural Gas			NGLs			Total
	(MBbl)			(MMcf)			(MBbl)			(MBOE)
Balance - December 31, 2012		519			10,099			392			2,594
Extensions and discoveries		3,586			4,198			526			4,812
Sale of minerals in place		(15	)		—			—			(15	)
Purchases of minerals in place		2,051			709			213			2,382
Production		(163	)		(2,635	)		(134	)		(737	)
Revision to previous estimates		100			11,842			321			2,395

Balance - December 31, 2013		6,078			24,213			1,318			11,431
Extensions and discoveries		1,909			1,403			221			2,364
Purchases of minerals in place		7,025			6,064			437			8,473
Production		(403	)		(2,132	)		(124	)		(882	)
Revision to previous estimates		(806	)		9,031			107			806

Balance - December 31, 2014		13,803			38,579			1,959			22,192
Extensions and discoveries		526			828			21			685
Sale of minerals in place		(4	)		(8,040	)		—			(1,344	)
Purchases of minerals in place		1,641			679			208			1,962
Production		(904	)		(2,143	)		(176	)		(1,437	)
Revision to previous estimates		(5,701	)		(16,565	)		(1,022	)		(9,484	)
Balance - December 31, 2015		9,361			13,338			990			12,574

Proved developed reserves:
December 31, 2012		296			8,245			268			1,938
December 31, 2013		1,307			11,053			557			3,706
December 31, 2014		6,093			16,214			1,005			9,800
December 31, 2015		6,114			10,954			673			8,613

Proved undeveloped reserves:
December 31, 2012		5,782			15,968			1,050			9,493
December 31, 2013		4,771			13,160			761			7,725
December 31, 2014		7,710			22,365			954			12,392
December 31, 2015		3,247			2,384			317			3,961

Changes in PUD reserves

Beginning proved undeveloped reserves at December 31, 2014	12,392
Undeveloped reserves transfer to developed	(1,700	)
Revision	(9,340	)
Purchases	1,924
Extensions and discoveries	685
Ending proved undeveloped reserves at December 31, 2015	3,961

Schedule Of Standardized Measure

The Standardized Measure is as follows (in thousands):

	December 31,
	2015			2014			2013
Future cash inflows	$	481,131		$	1,464,138		$	718,049
Future production costs		(192,349	)		(427,113	)		(202,957	)
Future development costs		(91,725	)		(312,010	)		(220,828	)
Future income tax expense		—			(180,248	)		—
Future net cash flows		197,057			544,767			294,264
10% annual discount for estimated timing of cash flows		(92,661	)		(288,911	)		(168,907	)
Standardized measure of discounted future cash flows	$	104,396		$	255,856		$	125,357

Schedule Of Changes In Standardized Measure Of Discontinued Future Net Cash Flows Relating To Proved Oil And Natural Gas Reserves

The following is a summary of the changes in the Standardized Measure for the Company’s proved oil and natural gas reserves during each of the years in the three year period ended December 31, 2015 (in thousands):

	December 31,
	2015			2014			2013
Beginning of year	$	255,856		$	125,357		$	25,132
Sales of oil and gas produced, net of production costs		(29,152	)		(35,794	)		(20,287	)
Sales of minerals in place		(2,470	)		—			(380	)
Net changes in prices and production costs		(288,064	)		(34,681	)		241
Extensions, discoveries, and improved recoveries		6,514			54,157			48,006
Changes in income taxes, net ⁽¹⁾		88,944			(88,944	)		—
Previously estimated development costs incurred during the period		26,977			18,252			3,227
Net changes in future development costs		6,697			7,028			(22,966	)
Purchases of minerals in place		7,695			163,309			56,069
Revisions of previous quantity estimates		(16,671	)		16,283			26,259
Accretion of discount		25,586			12,536			2,513
Changes in timing of estimated cash flows and other		22,484			18,353			7,543
End of year	$	104,396		$	255,856		$	125,357

⁽¹⁾

As a result of the December 19, 2014 Exchange, all historical financial information contained in this report is that of OVR and its subsidiaries. OVR, is a partnership for federal tax purposes and is not subject to federal income taxes or state or local income taxes that follow the federal treatment, and therefore OVR did not pay or accrue for such taxes. Pursuant to the Exchange OVR’s subsidiaries have become subsidiaries of Earthstone Energy, Inc., which is a taxable entity; as such estimated tax expense was included in the Standardized Measure for December 31, 2014.

- Definition

Tabular disclosure of the net quantities of an enterprise's interests in proved developed and undeveloped reserves of (a) crude oil (including condensate and natural gas liquids), (b) natural gas (including coal bed methane), (c) synthetic oil, (d) synthetic gas, and (e) other nonrenewable natural resources that are intended to be upgraded during the period as of the beginning of the period, changes in quantities during the period, and as of the end of the period.

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- Definition

Tabular disclosure of the future net cash flows relating to proved oil and gas reserves and oil and gas subject to purchase under long-term agreements in which the enterprise participates in the operation of the properties on which the oil and gas is located or otherwise serves as the producer. This information is presented in aggregate and for each geographic area for which reserve quantities are disclosed.

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