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

12 Months Ended

Dec. 31, 2016

Costs Incurred in Oil and Gas Producing Activities

The Company’s oil and gas activities for 2016, 2015 and 2014 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,
	2016 ⁽¹⁾		2015		2014
Acquisition cost:
Proved	$	48,116	$	4,508	$	74,728
Unproved		26,600		10,646		36,236

Exploration costs:
Exploratory drilling		—		—		—
Geological and geophysical		5		142		111

Development costs		28,577		56,862		75,105
Total additions	$	103,298	$	72,158	$	186,180

⁽¹⁾

Acquisition costs incurred during 2016 consisted entirely of the assets acquired in the Lynden Arrangement described in Note 3. Acquisitions and Divestitures of the Notes to Consolidated Financial Statements.

Summary of Capitalized Costs, Impairment, and Depreciation, Depletion and Amortization

Capitalized costs, impairment, and depreciation, depletion and amortization relating to our oil and natural gas properties producing activities, all of which are conducted within the continental United States as of December 31, 2016 and 2015 are summarized below (in thousands):

	December 31,
	2016			2015
Oil and gas properties, successful efforts method:
Proved properties	$	476,832		$	394,532
Accumulated impairment to proved properties		(113,760	)		(110,888	)
Proved properties, net of accumulated impairments		363,072			283,644

Unproved properties		100,612			79,619
Accumulated impairment to Unproved properties		(48,889	)		(45,010	)
Unproved properties, net of accumulated impairments		51,723			34,609

Total oil and gas properties, net of accumulated impairments		414,795			318,253

Accumulated depreciation, depletion and amortization		(145,393	)		(119,920	)
Net oil and gas properties	$	269,402		$	198,333

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, 2016, 2015 and 2014 are as follows:

	Oil			Natural Gas			NGLs			Total
	(MBbl)			(MMcf)			(MBbl)			(MBOE)
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
Sales 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
Extensions and discoveries		345			285			30			423
Purchases of minerals in place		5,548			14,770			2,637			10,647
Production		(878	)		(2,171	)		(225	)		(1,465	)
Revision to previous estimates		(7,265	)		(5,821	)		(1,892	)		(10,128	)
Balance - December 31, 2016		7,111			20,401			1,540			12,051

Proved developed reserves:
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
December 31, 2016		6,052			13,545			1,051			9,361

Proved undeveloped reserves:
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
December 31, 2016		1,059			6,856			489			2,690

Changes in PUD reserves

Proved undeveloped reserves at December 31, 2015	3,961
Conversions to developed	(169	)
Extensions and discoveries	293
Purchases	873
Revisions	(2,268	)
Proved undeveloped reserves at December 31, 2016	2,690

Schedule Of Standardized Measure

The Standardized Measure is as follows (in thousands):	December 31,
	2016			2015			2014
Future cash inflows	$	346,948		$	481,131		$	1,464,138
Future production costs		(172,062	)		(192,349	)		(427,113	)
Future development costs		(29,814	)		(91,725	)		(312,010	)
Future income tax expense		—			—			(180,248	)
Future net cash flows		145,072			197,057			544,767
10% annual discount for estimated timing of cash flows		(59,189	)		(92,661	)		(288,911	)
Standardized measure of discounted future cash flows	$	85,883		$	104,396		$	255,856

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, 2016 (in thousands):

	December 31,
	2016			2015			2014
Beginning of year	$	104,396		$	255,856		$	125,357
Sales of oil and gas produced, net of production costs		(24,998	)		(29,152	)		(35,794	)
Sales of minerals in place		—			(2,470	)		—
Net changes in prices and production costs		(102,143	)		(288,064	)		(34,681	)
Extensions, discoveries, and improved recoveries		241			6,514			54,157
Changes in income taxes, net ⁽¹⁾		—			88,944			(88,944	)
Previously estimated development costs incurred during the period		27,770			26,977			18,252
Net changes in future development costs		102,267			6,697			7,028
Purchases of minerals in place		16,921			7,695			163,309
Revisions of previous quantity estimates		(45,239	)		(16,671	)		16,283
Accretion of discount		11,506			25,586			12,536
Changes in timing of estimated cash flows and other		(4,838	)		22,484			18,353
End of year	$	85,883		$	104,396		$	255,856

⁽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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