NOTE K—OIL AND GAS RESERVE DATA (UNAUDITED)

The following estimates of proved reserve quantities and related standardized measure of discounted future net cash flows are estimates only, and do not purport to reflect realizable values or fair market values of the Company's reserves. The Company emphasizes that reserve estimates are inherently imprecise and that estimates of new discoveries are more imprecise than those of producing oil and gas properties. Accordingly, these estimates are expected to change as future information becomes available. All of the Company's reserves are located in the United States.

Proved reserves are estimated reserves of crude oil (including condensate and natural gas liquids) and natural gas that geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions. Proved developed reserves are those expected to be recovered through existing wells, equipment and operating methods.

The standardized measure of discounted future net cash flows for were computed by applying 12-month average prices for oil and gas (with consideration of price changes only to the extent provided by contractual arrangements) to the estimated future production of proved oil and gas reserves, less estimated future expenditures (based on year-end costs) to be incurred in developing and producing the proved reserves, less estimated future income tax expenses (based on year-end statutory tax rates, with consideration of future tax rates already legislated) to be incurred on pretax net cash flows less tax basis of the properties and available credits, and assuming continuation of existing economic conditions. The estimated future net cash flows are then discounted using a rate of 10%.

The following summaries of changes in reserves and standardized measure of discounted future net cash flows were prepared from estimates of proved reserves provided by Netherland, Sewell & Associates, Inc. for 2012 and 2011 and Williamson Petroleum Consultants, Inc., for 2010.

Summary of Changes in Proved Reserves

	Year ended December 31,

	2012						2011						2010
	Mbbls			Mmcf			Mbbls			Mmcf			Mbbls			Mmcf
Proved reserves
Beginning of year		14,963			43,860			10,250			68,200			10,221			62,900
Purchase of reserves in place		—			20,649			—			—			—			3,037
Discoveries and extensions		3,337			2,054			3,744			—			658			—
Revisions of previous estimates		(811	)		(9,813	)		1,880			(19,320	)		340			6,915
Production		(1,109	)		(5,514	)		(911	)		(5,020	)		(969	)		(4,652	)

End of year		16,380			51,236			14,963			43,860			10,250			68,200

Proved developed reserves
Beginning of year		8,348			28,515			7,518			49,300			7,933			49,868
End of year		8,064			51,236			8,348			28,515			7,518			49,300
Proved undeveloped reserves
Beginning of year		6,615			15,345			2,732			18,900			2,288			13,032
End of year		8,316			—			6,615			15,345			2,732			18,900

(a): Undeveloped reserves transferred to developed reserves were 0.9 MMBoe for the year ended December 31, 2012. Capital costs incurred to convert these proved undeveloped reserves to proved developed reserves were $32.4 million.
(b): The Company revised its 2012 year-end proved natural gas reserves upward by 12.9 Bcfe. Negative revisions decreased proved natural gas reserves by a net amount of 9.8 Bcfe due to pricing and performance. Positive revisions included 2 Bcfe of discoveries and extensions while an additional 20.6 Bcfe can be attributed to the Company purchasing Anadarko's interest in Atlantic Rim area properties on October 9, 2012.
(c): The Company revised its 2012 year-end proved oil reserves upward by 2.5 MMbbls. In 2012, total extensions and discoveries of 3.3 MMbbls resulted from the Company's drilling and completion activities in the Wilmington Townlot Unit in California. Negative revisions of 0.8 MMbbls were made based on production performance.

Standardized Measure of Discounted Future Net Cash Flows
Relating to Proved Oil and Gas Reserves

	December 31,

	2012			2011			2010
	(Amounts in thousands)
Future cash inflows	$	1,836,212		$	1,708,079		$	1,033,221
Future production costs and taxes		(574,959	)		(514,968	)		(466,507	)
Future development costs		(303,062	)		(254,982	)		(84,606	)
Future income tax expenses		(105,078	)		(108,977	)		—

Net future cash flows		853,113			829,152			482,108
Discounted at 10% for estimated timing of cash flows		(393,233	)		(343,146	)		(194,480	)

Standardized measure of discounted future net cash flows	$	459,880		$	486,006		$	287,628

Changes in Standardized Measure of Discounted Future Net Cash Flows
Related to Proved Oil and Gas Reserves

	Year ended December 31,

	2012			2011			2010
	(Amounts in thousands)
Sales, net of production costs and taxes	$	(88,725	)	$	(72,734	)	$	(59,430	)
Discoveries and extensions		108,438			152,973			15,994
Purchases of reserves in place		4,966			—			721
Changes in prices and production costs		(17,286	)		196,010			119,779
Revisions of quantity estimates		(39,172	)		56,710			17,619
Development costs incurred		36,539			30,892			5,544
Net changes in development costs		(90,392	)		(149,662	)		(68,497	)
Interest factor—accretion of discount		48,601			28,763			24,129
Net change in income taxes		5,037			(40,070	)		—
Changes in production rates (timing) and other		5,868			(4,504	)		(9,523	)

Net (decrease) increase		(26,126	)		198,378			46,336
Balance at beginning of year		486,006			287,628			241,292

Balance at end of year	$	459,880		$	486,006		$	287,628

Estimated future net cash flows represent an estimate of future net revenues from the production of proved reserves using average prices for 2012, 2011 and 2010 along with estimates of the operating costs, production taxes and future development and abandonment costs (less salvage value) necessary to produce such reserves. The prices used at December 31, 2012, 2011 and 2010 were $104.27, $104.75 and $73.30 per Bbl and $2.51, $3.21 and $4.13 per Mcf, respectively. No deduction has been made for depreciation, depletion or any indirect costs such as general corporate overhead or interest expense.

Operating costs and production taxes are estimated based on current costs with respect to producing oil and natural gas properties. Future development costs including abandonment costs are based on the best estimate of such costs assuming current economic and operating conditions. The future cash flows estimated to be spent to develop the Company's portion of proved undeveloped properties through December 31, 2017 is $223.2 million.

Income tax expense is computed based on applying the appropriate statutory tax rate to the excess of future cash inflows less future production and development costs over the current tax basis of the properties involved, less applicable carryforwards, for both regular and alternative minimum tax. The Company's net operating loss carryforward was sufficient to fully absorb any future income taxes from oil and gas operations in 2010.

The future net revenue information assumes no escalation of costs or prices, except for oil and natural gas sales made under terms of contracts which include fixed and determinable escalation. Future costs and prices could significantly vary from current amounts and, accordingly, revisions in the future could be significant.