Results of Operations for Oil and Gas Producing Activities

The following tables present the results of our oil and gas producing activities for the respective years.



	Continuing Operations			Discontinued Operations
	Domestic			Malaysia		China		Total
	(In millions)
Year Ended December 31, 2013
Revenues	$	1,777		$	822	$	69	$	2,668
Production costs	265			117		8		390
Production taxes and other operating expenses	204			272		12		488
Depreciation, depletion and amortization	668			244		18		930
Income taxes	224			72		8		304
Results of operations for oil and gas producing activities	$	416		$	117	$	23	$	556

Year Ended December 31, 2012
Revenues	$	1,469		$	1,005	$	86	$	2,560
Production costs	292			101		7		400
Production taxes and other operating expenses	174			259		18		451
Depreciation, depletion and amortization	683			251		21		955
Impairment of oil and gas properties	1,488			—		—		1,488
Income taxes	(410		)	150		10		(250		)
Results of operations for oil and gas producing activities	$	(758	)	$	244	$	30	$	(484	)

Year Ended December 31, 2011
Revenues	$	1,735		$	647	$	82	$	2,464
Production costs	258			90		5		353
Production taxes and other operating expenses	161			242		20		423
Depreciation, depletion and amortization	622			126		19		767
Income taxes	243			72		10		325
Results of operations for oil and gas producing activities	$	451		$	117	$	28	$	596

Costs Incurred

Costs incurred for oil and gas property acquisitions, exploration and development for each of the years in the three-year period ended December 31, 2013 are as follows:



	Continuing Operations		Discontinued Operations
	Domestic		Malaysia		China		Total
	(In millions)
2013:
Property acquisitions:
Unproved	$	154	$	—	$	—	$	154
Proved	8		—		1		9
Exploration⁽¹⁾	966		101		33		1,100
Development⁽²⁾	691		211		140		1,042
Total costs incurred⁽³⁾	$	1,819	$	312	$	174	$	2,305

2012:
Property acquisitions:
Unproved	$	64	$	—	$	—	$	64
Proved	3		—		—		3
Exploration⁽¹⁾	929		63		1		993
Development⁽²⁾	659		108		86		853
Total costs incurred⁽³⁾	$	1,655	$	171	$	87	$	1,913

2011:
Property acquisitions:
Unproved	$	361	$	—	$	—	$	361
Proved	72		19		—		91
Exploration⁽¹⁾	980		9		25		1,014
Development⁽²⁾	795		279		31		1,105
Total costs incurred⁽³⁾	$	2,208	$	307	$	56	$	2,571

_________________

(1)

Includes $250 million, $239 million and $237 million of domestic costs for non-exploitation activities for 2013, 2012 and 2011, respectively; $75 million, $63 million and $9 million of Malaysia costs for non-exploitation activities for 2013, 2012 and 2011, respectively; and $33 million, $1 million and $25 million of China costs for non-exploitation activities for 2013, 2012 and 2011, respectively.


(2)	Includes $121 million, $9 million and $33 million for 2013, 2012 and 2011, respectively, of asset retirement costs.


(3)	Other items impacting the capitalized costs of our oil and gas properties which are not included in total costs incurred are as follows:



	2013		2012		2011
	(In millions)
Property sales — Domestic	$	23	$	606	$	434
Ceiling test writedown — Domestic	—		1,488		—
	$	23	$	2,094	$	434

Capitalized Costs

Capitalized costs for our oil and gas producing activities consisted of the following at the end of each of the years in the three-year period ended December 31, 2013:



	Continuing Operations			Discontinued Operations
	Domestic			Malaysia			China			Total
	(In millions)
December 31, 2013:
Proved properties	$	13,185		$	1,441		$	550		$	15,176
Unproved properties	1,116			115			—			1,231
	14,301			1,556			550			16,407
Accumulated depreciation, depletion and amortization	(7,185		)	(1,009		)	(112		)	(8,306		)
Net capitalized costs	$	7,116		$	547		$	438		$	8,101

December 31, 2012:
Proved properties	$	11,221		$	1,140		$	375		$	12,736
Unproved properties	1,291			104			1			1,396
	12,512			1,244			376			14,132
Accumulated depreciation, depletion and amortization	(6,535		)	(747		)	(96		)	(7,378		)
Net capitalized costs	$	5,977		$	497		$	280		$	6,754

Reserves

Users of this information should be aware that the process of estimating quantities of proved and proved developed oil and gas reserves is very complex, requiring significant subjective decisions in the evaluation of all available geological, engineering and economic data for each reservoir. The data for a given reservoir also may change substantially over time as a result of numerous factors, including additional development activity, evolving production history and continual reassessment of the viability of production under varying economic conditions. Consequently, material revisions to existing reserve estimates may occur from time to time.

Reserves Estimates. All reserve information in this report is based on estimates prepared by our petroleum engineering staff and is the responsibility of management. The preparation of our oil and gas reserves estimates is completed in accordance with our prescribed internal control procedures, which include verification of data input into our reserves forecasting and economics evaluation software, as well as multi-discipline management reviews. The technical employee responsible for overseeing the preparation of the reserves estimates has a Bachelor of Science in Petroleum Engineering, with more than 30 years of experience (including 20 years of experience in reserve estimation). For additional information regarding our reserves estimation process, please see Items 1 and 2, “Business and Properties — Reserves.”

Reserves Activity Overview. The following is a discussion of our proved reserves and reserve additions and revisions.



	Year Ended December 31,
	2013		2012		2011
	(MMBOE)
Proved Reserves:
Beginning of year	566		652		619
Reserve additions	82		86		151
Reserve revisions	14		(91	)	(48	)
Sales	(1	)	(30	)	(20	)
Production	(49	)	(51	)	(50	)
End of year	612		566		652

Our proved crude oil and condensate reserves at year-end 2013 were 270 million barrels compared to 237 million barrels and 247 million barrels at year-end 2012 and 2011, respectively. Our proved NGL reserves at year-end 2013 were 68 million barrels compared to 37 million barrels and 16 million barrels at year-end 2012 and 2011, respectively. Our proved natural gas reserves at year-end 2013 were 1.6 Tcf compared to 1.8 Tcf and 2.3 Tcf year-end 2012 and 2011, respectively. Liquids comprised about 55%, 48% and 40% of our proved reserves at year-end 2013, 2012 and 2011, respectively.

Reserve Additions and Revisions. During 2013, our proved reserves increased 96 MMBOE as a result of additions (extensions, discoveries, improved recovery and purchases of reserves in place) and revisions of previous estimates. We expect the majority of future reserve growth to be associated with infill drilling, extensions of current fields and new discoveries, as well as improved recovery operations and purchases of proved properties. The success of these operations will directly impact reserve additions or revisions in the future.

Additions. We added 80 MMBOE of proved reserves through discoveries, extensions and other additions, and 2 MMBOE through purchases. Drilling additions related to our domestic resource plays constituted 98% of our additions. Of the drilling additions, 54 MMBOE were proved undeveloped additions and 17 million barrels were proved developed liquids reserves.

Revisions. Total proved reserve revisions in 2013 were a positive 14 MMBOE or 2% of the beginning of year proved reserves. They included a positive 10 MMBOE price revision which was primarily related to our onshore natural gas plays. In mature plays, dominated by infill drilling and where reserve growth cannot be classified as an extension or discovery, the change in reserves is captured as a revision. In 2013, our revisions associated with the development of existing fields were a positive 75 MMBOE. Our focus on developing our liquids assets resulted in the removal of 294 Bcf (49 MMBOE) of gas reserves because they will not be converted to developed status in the next five years. The remaining revisions are associated with development plan changes and well performance. In the Uinta Basin, a change to the gas and projected NGL yield resulted in a negative 14 MMBOE performance revision.

Sales. In 2013, we sold 1 MMBOE of proved reserves associated with non-strategic assets and acreage trades. In 2012, we sold 30 MMBOE of proved reserves associated with non-strategic assets.

Estimated Net Quantities of Proved Oil and Gas Reserves

The following table sets forth our total net proved reserves and our total net proved developed and undeveloped reserves as of December 31, 2010, 2011, 2012 and 2013 and the changes in our total net proved reserves during the three-year period ended December 31, 2013:



	Crude Oil and Condensate (MMBbls)								Natural Gas (Bcf)
	Continuing Operations		Discontinued Operations						Continuing Operations		Discontinued Operations
	Domestic		Malaysia⁽¹⁾		China⁽¹⁾		Total		Domestic		Malaysia⁽¹⁾		China⁽¹⁾	Total
Proved developed and undeveloped reserves as of:
December 31, 2010	164		28		6		198		2,492		—		—	2,492
Revisions of previous estimates	(24	)	(2	)	—		(26	)	(175	)	—		—	(175	)
Extensions, discoveries and other additions	73		3		15		91		276		4		—	280
Purchases of properties	7		—		—		7		9		—		—	9
Sales of properties	(5	)	—		—		(5	)	(91	)	—		—	(91	)
Production	(11	)	(6	)	(1	)	(18	)	(182	)	—		—	(182	)
December 31, 2011	204		23		20		247		2,329		4		—	2,333
Revisions of previous estimates	(13	)	2		—		(11	)	(525	)	(2	)	—	(527	)
Extensions, discoveries and other additions	38		—		—		38		181		—		—	181
Purchases of properties	—		—		—		—		1		—		—	1
Sales of properties	(15	)	—		—		(15	)	(80	)	—		—	(80	)
Production	(11	)	(10	)	(1	)	(22	)	(151	)	(2	)	—	(153	)
December 31, 2012	203		15		19		237		1,755		—		—	1,755
Revisions of previous estimates	19		2		7		28		(166	)	—		—	(166	)
Extensions, discoveries and other additions	25		2		—		27		187		—		—	187
Purchases of properties	1		—		—		1		1		—		—	1
Sales of properties	—		—		—		—		(5	)	—		—	(5	)
Production	(14	)	(8	)	(1	)	(23	)	(124	)	—		—	(124	)
December 31, 2013	234		11		25		270		1,648		—		—	1,648
Proved developed reserves as of:
December 31, 2010	87		15		5		107		1,505		—		—	1,505
December 31, 2011	88		17		5		110		1,405		4		—	1,409
December 31, 2012	92		14		4		110		1,042		—		—	1,042
December 31, 2013	112		11		4		127		1,055		—		—	1,055
Proved undeveloped reserves as of:
December 31, 2010	77		13		1		91		987		—		—	987
December 31, 2011	116		6		15		137		924		—		—	924
December 31, 2012	111		1		15		127		713		—		—	713
December 31, 2013	122		—		21		143		593		—		—	593

_________________


(1)	All of our reserves in Malaysia and China are associated with production sharing contracts and are calculated using the economic interest method.

Estimated Net Quantities of Proved Oil and Gas Reserves — (Continued)



	NGLs (MMBbls)						Total Oil Equivalents (MMBOE)
	Continuing Operations		Discontinued Operations				Continuing Operations		Discontinued Operations
	Domestic		Malaysia⁽¹⁾	China⁽¹⁾	Total		Domestic		Malaysia⁽¹⁾		China⁽¹⁾		Total
Proved developed and undeveloped reserves as of:
December 31, 2010	6		—	—	6		585		28		6		619
Revisions of previous estimates	7		—	—	7		(46	)	(2	)	—		(48	)
Extensions, discoveries and other additions	5		—	—	5		123		4		15		142
Purchases of properties	—		—	—	—		9		—		—		9
Sales of properties	—		—	—	—		(20	)	—		—		(20	)
Production	(2	)	—	—	(2	)	(43	)	(6	)	(1	)	(50	)
December 31, 2011	16		—	—	16		608		24		20		652
Revisions of previous estimates	9		—	—	9		(92	)	1		—		(91	)
Extensions, discoveries and other additions	17		—	—	17		86		—		—		86
Purchases of properties	—		—	—	—		—		—		—		—
Sales of properties	(2	)	—	—	(2	)	(30	)	—		—		(30	)
Production	(3	)	—	—	(3	)	(40	)	(10	)	(1	)	(51	)
December 31, 2012	37		—	—	37		532		15		19		566
Revisions of previous estimates	14		—	—	14		5		2		7		14
Extensions, discoveries and other additions	22		—	—	22		78		2		—		80
Purchases of properties	—		—	—	—		2		—		—		2
Sales of properties	—		—	—	—		(1	)	—		—		(1	)
Production	(5	)	—	—	(5	)	(40	)	(8	)	(1	)	(49	)
December 31, 2013	68		—	—	68		576		11		25		612
Proved developed reserves as of:
December 31, 2010	3		—	—	3		341		15		5		361
December 31, 2011	10		—	—	10		332		18		5		355
December 31, 2012	15		—	—	15		280		14		4		298
December 31, 2013	35		—	—	35		322		11		4		337
Proved undeveloped reserves as of:
December 31, 2010	3		—	—	3		244		13		1		258
December 31, 2011	6		—	—	6		276		6		15		297
December 31, 2012	22		—	—	22		252		1		15		268
December 31, 2013	33		—	—	33		254		—		21		275

_________________


(1)	All of our reserves in Malaysia and China are associated with production sharing contracts and are calculated using the economic interest method.

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

The standardized measure of discounted future net cash flows from our estimated proved oil and gas reserves is as follows:



	Continuing Operations			Discontinued Operations
	Domestic			Malaysia			China			Total
	(In millions)
2013:
Future cash inflows	$	26,600		$	1,245		$	2,640		$	30,485
Less related future:
Production costs	(8,302		)	(771		)	(959		)	(10,032		)
Development and abandonment costs	(4,166		)	(148		)	(143		)	(4,457		)
Future net cash flows before income taxes	14,132			326			1,538			15,996
Future income tax expense	(4,278		)	—			(316		)	(4,594		)
Future net cash flows before 10% discount	9,854			326			1,222			11,402
10% annual discount for estimating timing of cash flows	(5,226		)	(23		)	(320		)	(5,569		)
Standardized measure of discounted future net cash flows	$	4,628		$	303		$	902		$	5,833

2012:
Future cash inflows	$	21,724		$	1,754		$	2,186		$	25,664
Less related future:
Production costs	(7,042		)	(1,135		)	(888		)	(9,065		)
Development and abandonment costs	(3,949		)	(82		)	(202		)	(4,233		)
Future net cash flows before income taxes	10,733			537			1,096			12,366
Future income tax expense	(2,786		)	(66		)	(239		)	(3,091		)
Future net cash flows before 10% discount	7,947			471			857			9,275
10% annual discount for estimating timing of cash flows	(4,539		)	(55		)	(245		)	(4,839		)
Standardized measure of discounted future net cash flows	$	3,408		$	416		$	612		$	4,436

2011:
Future cash inflows	$	26,241		$	2,751		$	2,213		$	31,205
Less related future:
Production costs	(6,523		)	(1,563		)	(850		)	(8,936		)
Development and abandonment costs	(4,246		)	(161		)	(228		)	(4,635		)
Future net cash flows before income taxes	15,472			1,027			1,135			17,634
Future income tax expense	(4,344		)	(210		)	(268		)	(4,822		)
Future net cash flows before 10% discount	11,128			817			867			12,812
10% annual discount for estimating timing of cash flows	(6,404		)	(125		)	(302		)	(6,831		)
Standardized measure of discounted future net cash flows	$	4,724		$	692		$	565		$	5,981

Set forth in the table below is a summary of the changes in the standardized measure of discounted future net cash flows for our proved oil and gas reserves during each of the years in the three-year period ended December 31, 2013:



	Continuing Operations			Discontinued Operations
	Domestic			Malaysia			China			Total
	(In millions)
2013:
Beginning of the period	$	3,408		$	416		$	612		$	4,436
Revisions of previous estimates:
Changes in prices and costs	944			33			2			979
Changes in quantities	81			76			302			459
Changes in future development costs	(83		)	(126		)	(50		)	(259		)
Previously estimated development costs incurred during the period	549			79			130			758
Additions to proved reserves resulting from extensions, discoveries and improved recovery, less related costs	1,012			49			—			1,061
Purchases and sales of reserves in place, net	13			—			—			13
Accretion of discount	470			33			82			585
Sales of oil and gas, net of production costs	(973		)	(330		)	(46		)	(1,349		)
Net change in income taxes	(815		)	59			(63		)	(819		)
Production timing and other	22			14			(67		)	(31		)
Net increase (decrease)	1,220			(113		)	290			1,397
End of period	$	4,628		$	303		$	902		$	5,833
2012:
Beginning of the period	$	4,724		$	692		$	565		$	5,981
Revisions of previous estimates:
Changes in prices and costs	(1,490		)	(14		)	(24		)	(1,528		)
Changes in quantities	(427		)	23			—			(404		)
Changes in future development costs	294			(19		)	(2		)	273
Previously estimated development costs incurred during the period	434			93			67			594
Additions to proved reserves resulting from extensions, discoveries and improved recovery, less related costs	791			—			24			815
Purchases and sales of reserves in place, net	(758		)	—			—			(758		)
Accretion of discount	542			64			77			683
Sales of oil and gas, net of production costs	(1,129		)	(439		)	(63		)	(1,631		)
Net change in income taxes	650			119			4			773
Production timing and other	(223		)	(103		)	(36		)	(362		)
Net increase (decrease)	(1,316		)	(276		)	47			(1,545		)
End of period	$	3,408		$	416		$	612		$	4,436
2011:
Beginning of the period	$	4,058		$	557		$	139		$	4,754
Revisions of previous estimates:
Changes in prices and costs	728			191			83			1,002
Changes in quantities	(829		)	(60		)	(7		)	(896		)
Changes in future development costs	(31		)	(110		)	—			(141		)
Previously estimated development costs incurred during the period	499			188			13			700
Additions to proved reserves resulting from extensions, discoveries and improved recovery, less related costs	1,366			101			497			1,964
Purchases and sales of reserves in place, net	(93		)	—			—			(93		)
Accretion of discount	591			71			17			679
Sales of oil and gas, net of production costs	(1,048		)	(197		)	(36		)	(1,281		)
Net change in income taxes	(222		)	(26		)	(141		)	(389		)
Production timing and other	(295		)	(23		)	—			(318		)
Net increase	666			135			426			1,227
End of period	$	4,724		$	692		$	565		$	5,981