Williams announced that its total proved natural gas and oil reserves as of Dec. 31, 2010, were approximately 4.5 trillion cubic feet equivalent (Tcfe) – including international reserves of approximately 0.2 Tcfe.
Approximately 94 percent of total proved reserves are natural gas, with approximately 59 percent proved developed and 41 percent proved undeveloped, reflecting a continuation of the increase in the ratio of proved developed to undeveloped..
Under Securities and Exchange Commission reporting rules, material undeveloped oil and gas reserves should not remain undeveloped for five years or more after disclosure without an explanation of the specific circumstances warranting their disclosure. Williams anticipates that all of its disclosed proved reserves can be developed within the next five years per SEC definitions for proved reserves.
Williams has reclassified a net 253 billion cubic feet equivalent (Bcfe) from proved to probable reserves attributable to locations not expected to be developed within five years. This amount is predominately in the Piceance Basin where the company has a large inventory of drilling locations. In total, Williams estimates it has 353 Bcfe of undeveloped reserves that could be classified as proved with an additional two years of development beyond the five-year limit.
Adding these reserves to Williams' year-end SEC U.S. proved reserves makes a total of 4.6 Tcfe for a reserves replacement ratio of 188 percent vs. 104 percent on an unadjusted basis. The following table sets out the company's total year-end 2010 SEC U.S. proved reserves and an alternate scenario considering seven years of development activity instead of five.
In 2010, Williams invested almost $2.7 billion of capital in its U.S. exploration and production business. That figure includes $988 million for development drilling and $1.7 billion in growth acquisitions.
"Our new positions in the Bakken and Marcellus turned 2010 into a transformational year," said Ralph Hill, president of Williams' E&P business. "We diversified both geographically and in terms of our product slate.
"We have significant scale in these areas now, similar to the framework we established in the Piceance and Powder River basins," Hill said.
In 2010, Williams participated in 1,162 gross wells in the United States, achieving a drilling success rate of 99 percent.
Williams added 528 Bcfe through 2010 U.S. drilling activity for an adjusted proved developed domestic reserves replacement cost of $1.87 per Mcfe.
Year-end 2010 proved, probable, and possible (3P) reserves increased by 7 percent to 15.9 Tcfe from 14.8 Tcfe at year-end 2009. In accordance with SEC reserves reporting rules, proved reserves were calculated using the average of the first day of the month prices for the twelve months in 2010 held constant. Probable and possible reserves were calculated using forward-market prices.
The three-year average proved developed finding and development cost from drilling activity was $2.44 per Mcfe, which is calculated by dividing the three-year total development capital by the three-year net change in proved developed reserves plus production.
International proved reserves for year-end 2010 increased to approximately 35.3 million barrels of oil equivalent, or approximately 0.2 Tcfe, which reflects an increase of 7 percent from the prior year of approximately 32.9 million barrels of oil equivalent for a reserves replacement ratio of 165 percent.
Approximately 94 percent of Williams' year-end 2010 U.S. proved reserves estimates were audited by Netherland, Sewell & Associates, Inc. (93%), or Miller and Lentz (1%).
Their judgment determined that Williams' estimates are, in the aggregate, reasonable and have been prepared in accordance with the Standards Pertaining to the Estimating and Auditing of Oil and Gas Reserves Information promulgated by the Society of Petroleum Engineers (SPE standards).
Approximately 94 percent of proved reserves estimates for international properties were reviewed and certified by Ralph E. Davis and Associates, with the remaining approximately 6 percent reviewed and certified by RPS Energy.
Proved reserves are estimated quantities that geological and engineering data demonstrate with reasonable certainty to be recoverable in the future from known reservoirs under existing economic conditions, operating methods and government regulations.
Williams' exploration and production business primarily develops natural gas reserves in the Piceance, Powder River and San Juan basins in the Rocky Mountains, the Marcellus (Pennsylvania) and Barnett (Texas) shales, and oil reserves in the Bakken Shale/Three Forks formations in North Dakota, and internationally in Argentina and Colombia.
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